First-Quarter GDP Growth Unexpectedly Revised Lower as Consumer Spending Weakens

03:58 PM EDT, 05/28/2026 (MT Newswires) -- The US economy expanded at a slower rate in the first quarter than previously estimated as consumer spending growth decelerated, the Bureau of Economic Analysis' second estimate showed Thursday.

Real gross domestic product increased at a 1.6% annualized rate in the March quarter, down from a 2% increase reported in the initial estimate. The consensus was for the growth rate to be left unrevised in a survey compiled by Bloomberg.

Growth in consumer spending -- as measured by personal consumption expenditures -- was revised to 1.4% from 1.6% previously reported, though Wall Street expected no change.

A separate government report showed Thursday that annual inflation hit the highest reading in almost three years in April even as consumer spending moderated in the face of high gasoline prices in the US.

"The downward revisions to consumer spending in (the first quarter) and the slowdown in April point to a consumer coming under stress, but not one that is about to buckle," Michael Pearce, chief US economist at Oxford Economics, said in remarks e-mailed to MT Newswires.

"We expect consumer spending to expand at a sub-2% pace for most of this year, as the fiscal stimulus from higher refunds wears off and the drag from higher gasoline prices mounts," Pearce said.

First-quarter headline PCE inflation was left unchanged at 4.5% in the second estimate. Core PCE inflation -- which excludes the volatile food and energy components -- was revised upward to 4.4% from the previous growth estimate of 4.3%, official data showed.

"We expect rising electronics inflation and a passthrough of higher oil prices will offset any fading of tariff-price pressures and keep core inflation above 3% for most of this year," Pearce said. "That doesn't mean the (Federal Reserve) will need to hike rates, because services inflation remains contained, and we expect it will remain so."

The US and Iran have agreed to a memorandum of understanding to extend a ceasefire between the two countries and begin talks on Tehran's nuclear program, Axios reported Thursday, citing sources. However, US President Donald Trump is yet to sign off on the deal, according to the report.

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