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June 29 (UPI) — An increase in consumer spending contributed to the upward revision of U.S. economic growth, with gross domestic product expanding at an annual rate of 2% during the first quarter of the year.
The Bureau of Economic Analysis, in its latest estimate released on Thursday, revised its previous forecast from 1.3% to 2% following the fourth quarter’s growth of 2.6%.
“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,” stated the BEA.
Consumers play a significant role in driving economic growth. Personal income for the first quarter was revised upward by $26.7 billion to $278 billion, while personal savings increased by $11.6 billion to $840.9 billion.
Disposable income also experienced a jump, rising by 12.9% to reach $587.9 billion.
Although first quarter figures are considered lagging economic indicators, they suggest that consumers are resilient to the prevailing inflationary pressures. U.S. Federal Reserve Chairman Jerome Powell, speaking at a banking conference in Spain, mentioned that more pressure may be necessary 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.”
Despite successive rate hikes and the possibility of more later in the year, data shows that the U.S. economy has avoided a recession, characterized by high unemployment rates 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.
Certain sectors of the economy are experiencing a slowdown. GDP growth in the manufacturing sector and wholesale trade has declined, but this contraction has been outweighed by gains in healthcare and retail trade.
Broader markets responded positively to the news, with all major stock market indices trading in the black at the start of Thursday’s session.
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