1 of 3 | Consumer spending and savings remained robust despite a steady increase in prices at the retail level. Spending led to a slight expansion in GDP for the first quarter. File Photo by John Angelillo/UPI | License Photo
April 27 (UPI) -- The U.S. economy expanded again during the first quarter, supported in part by an increase in consumer spending, though growth was slower than during the three-month period ending in December, the Commerce Department reported.
The federal government reported Thursday that the economy expanded by 1.1% from January through March, the third consecutive quarter for growth in the world's largest economy. The expansion was driven in part by an increase in spending on motor vehicles, healthcare and food services.
Consumer spending accounts for about 70% of total U.S. economic activity, and levels grew by 3.7% at an annual pace, showing consumers remain resilient against higher prices.
First quarter expansion, however, was much weaker than the 2.6% expansion during the three months ending in December, suggesting the economy is slowing amid a fight to tackle consumer-level inflation.
Savings and disposable cash nevertheless showed consumers are undeterred. Disposable personal income increased 12.5% from fourth quarter levels to $571.2 billion, compared with 8.9% during the fourth quarter.
Personal savings, meanwhile, was $946.2 billion over the three months ending in March, compared with $758.8 billion in the fourth quarter.
President Joe Biden welcomed the news, saying the economy looks strong as it transitions to a steadier pace of expansion.
"This past quarter, real personal disposable income increased and American consumers continued to spend, even as the overall pace of growth moderated," he added.
First quarter GDP may be a sign of things to come as the period ended only a few short weeks after the collapse of Silicon Valley Bank led to concerns about a global financial crisis that would compound recessionary fears.
In April, the start of the second quarter, consumer expectations declined, according to survey results from The Conference Board.
"Compared to last month, fewer households expect business conditions to improve and more expect worsening of conditions in the next six months," Ataman Ozyildirim, the senior director of economics at The Conference Board, said. "They also expect fewer jobs to be available over the short term."
A formal recession would be determined by the non-profit National Bureau of Economic Research, which takes into account everything from gross domestic product to employment when considering the designation.
The slowing pace of economic growth should be welcome news for policymakers at the Federal Reserve, though it's widely expected to embrace another rate hike when it meets next week. Inflation is running close to 5% on an annual basis, higher than the 2% target rate for the Fed.