June 29 (UPI) — An increase in consumer spending in part led to an upward revision to growth in the U.S. economy, where gross domestic product expanded at an annual rate of 2% during the three-month period to March.
The Bureau of Economic Analysis on Thursday provided its latest estimate on GDP for the first quarter on Thursday, revising its previous forecast up from 1.3% to 2%, following growth of 2.6% during the fourth quarter.
“The increase in real GDP in the first quarter reflected increases in consumer spending, exports, state and local government spending, federal government spending, and nonresidential fixed investment that were partly offset by decreases in private inventory investment and residential fixed investment,” the BEA stated.
The consumer is a main driver of economic growth. Personal income was revised upward by $26.7 billion to $278 billion during the first quarter, while personal savings were revised higher by $11.6 billion to $840.9 billion.
Disposable income increased as well, jumping 12.9% to reach $587.9 billion.
While first quarter figures are a lagging economic indicator, it does suggest that consumers remain somewhat resilient to lingering inflationary pressures. Speaking at a banking conference in Spain, U.S. Federal Reserve Chairman Jerome Powell said more pressure may be needed to control inflation.
“We see the effects of our policy tightening on demand in the most interest rate-sensitive sectors of the economy, particularly housing and investment,” he said. “It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation.”
But even with successive rate hikes, and the possibility for more later this year, data show the U.S. economy has skirted a recession, which would be marked by high levels of unemployment and negative economic growth.
“The final reading of first quarter GDP and personal consumption reminded traders that the economy is far from breaking and probably will need to be subject to much more Fed tightening,” added Edward Moya, a market analyst at New York brokerage OANDA.
Parts of the economy are slowing, however. In terms of industries, GDP growth in the manufacturing sector declined as did wholesale trade. That contraction was more than offset by gains in healthcare and retail trade.
Broader markets reacted positively to the news, with all major stock market indices trading in the black at the start of Thursday trading.
