US GDP growth revised up to 2.1% as spending slows

US GDP growth for the first quarter was revised higher to a 2.1% annual rate, but updated federal data showed households pulled back sharply on spending.

The Commerce Departments Bureau of Economic Analysis released its third estimate on Thursday, lifting growth from the previously published 1.6% pace. Economists surveyed by Reuters had expected no change to the earlier figure.

The revision shifts the narrative toward a sturdier headline expansion even as demand from consumers, the economys largest engine, appeared to lose momentum. Consumer spending represents more than two-thirds of US economic activity.

Imports revision lifts the headline GDP estimate

The BEA reported that the upward move in the GDP rate was driven largely by lower imports than first estimated, particularly in consumer and capital goods. Because imports are subtracted in the GDP calculation, a smaller import figure mechanically boosts the growth rate.

That import-related lift partially offset weaker domestic consumption in the revised data. The report did not change the broader picture that growth remained modest compared with many post-pandemic quarters.

For comparison, the economy expanded at a 0.5% annual rate in the fourth quarter of last year (October through December). On that measure, the first-quarter figure now points to faster growth than late 2022.

Consumer spending nearly stalls in the new estimate

While the overall growth number increased, the BEA cut real consumer spending growth to 0.5% at an annual rate. That was a sizeable downgrade from the prior estimate of 1.4%.

The revised data showed weaker outlays for services, including financial services and insurance, along with lower spending tied to international travel. The services category is closely watched because it has been a major driver of the expansion as goods spending normalized from pandemic-era surges.

Part of the reduction in financial services spending was linked to a stock-market decline during the quarter, according to the report. Market downturns can affect measured financial service activity and related household behavior, which can feed into GDP accounting in less visible ways.

What the mixed signals mean for the outlook

The combination of higher GDP and softer consumption highlights an important distinction in the national accounts: a stronger headline number can reflect trade and inventory dynamics rather than a pickup in underlying demand. When imports fall, growth can look better even if domestic spending is slowing.

Investors and policymakers often focus on consumer spending because it tends to be more persistent than trade-driven changes. A downshift to 0.5% growth suggests households were far less supportive of overall momentum than earlier data indicated.

The revised picture may also inform how analysts interpret resilience in the face of higher interest rates. If consumption was already cooling in the first quarter, upcoming data on retail sales, services activity, and labor-market conditions will be crucial for gauging whether demand continues to soften.

Next steps will include the second-quarter GDP releases and monthly reports that feed into future revisions. Markets will be watching whether consumer spending rebounds, and whether trade-related swings continue to meaningfully influence US GDP growth.