WASHINGTON: US economic growth accelerated in the first quarter, but inflation pressures were much weaker than initially thought, supporting a recent decision by the Federal Reserve to suspend further rate hikes.
There are also signs that the export- and inventory-driven momentum faded early in the second quarter. Manufacturing, retail sales, housing and exports dropped in April.
The US central bank early this year suspended its three-year monetary policy tightening campaign, dropping forecasts for any interest rate increases this year. The Fed raised borrowing costs four times in 2018.
Gross domestic product increased at a 3.1 per cent annualized rate, the government said in its second reading of first-quarter GDP on Thursday. That was slightly down from the 3.2 per cent pace estimated last month. The economy grew at a 2.2 per cent pace in October-December.
A gauge of inflation tracked by the Fed increased at a one per cent rate last quarter, instead of the previously reported 1.3 per cent pace. Fed policymakers are likely to shrug off the last quarter's growth spurt and focus on the weak domestic demand and inflation when they meet next month.
While the government trimmed its initial estimate for inventory investment, export growth was raised. These two volatile components were the key drivers of the rise in GDP in the first quarter.
There was a small upward revision to consumer spending growth. Business spending on equipment actually contracted in the last quarter, while the housing market was weaker than initially thought.
The first-quarter GDP growth revision was in line with economists' expectations. Excluding trade, inventories and government spending, the economy grew at a 1.3 per cent rate as reported last month. That was the slowest since the second quarter of 2013. The economy will mark 10 years of expansion in July, the longest on record.
The current slowdown in growth largely reflects the fading stimulus from the Trump administration's hefty tax cuts and spending increases last year.
