(NewsNation) — The U.S. economy grew at a faster rate in the first quarter than previously estimated, according to government data released Thursday.
Gross domestic product — the economy’s total output of goods and services — grew at a 1.3% annual rate from January to March, an upgrade from the previous 1.1% estimate.
Even with the adjustment, the first quarter of 2023 marks the weakest GDP growth since the second quarter of 2022 when the economy shrank. By comparison, the economy grew at a 2.6% rate from October to December and 3.2% the quarter before that.
Despite the gradual slowdown, consumer spending, which accounts for about 70% of U.S. economic activity, remained strong and grew at 3.8%. That’s the fastest such rate in nearly two years.
Thursday’s upward revision will likely come as unwelcome news for the Federal Reserve, which has raised interest rates 10 consecutive times to cool the economy and tame inflation.
“Revised higher is not what is in [the Fed’s] game plan,” said Dan Roccato, a finance professor at the University of San Diego.
It remains to be seen whether the Fed will raise rates once again in June.
As economic growth has slowed, inflation has improved in recent months but still remains higher than the Fed’s 2% target. Prices were up 4.9% in April compared to a year earlier — down from a 9.1% rate in June, per the Consumer Price Index.
Even with the Fed’s rate hikes, the U.S. labor market has remained resilient. America’s employers added 253,000 jobs in April and the unemployment rate fell to 3.4%, matching a 54-year low.
Average hourly wages rose by 0.5% from March to April, nearly twice what economists had expected.
Roccato expects consumer spending to stay robust until the job market sours.
“[The Fed] still hasn’t accomplished their real goal, which is to slow down the labor market. And until that happens, it’s hard to see how that GDP number crashes,” he said.
A broader economic downturn may still be on the horizon. Corporate profits decreased 2.8% in the first quarter compared to one year ago. Gross private domestic investment, which measures how much businesses invest in their own country, fell 11.5% in the first quarter.
With rising mortgage rates, the real estate market has already taken a beating. In April, sales of existing homes were 23% below their level a year earlier.
Federal Reserve economists expect a “mild recession” starting later this year, followed by a “moderately paced” recovery, according to minutes from the latest meeting published Wednesday.
The latest revised GDP estimate comes as lawmakers on Capitol Hill continue to spar over the debt ceiling. If the debt ceiling isn’t raised in time, the nation would default on its debt. That could happen as soon as early June and it’s a scenario that could ignite a global economic crisis.
The Associated Press contributed to this report.