US GDP revised down to 1.8%

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The US economy grew by less than previously estimated over the first three months of the year, according to new official figures.

Data from the US Department of Commerce’s Bureau of Economic Analysis shows that the US expanded by an annualised 1.8 per cent during the first quarter, not the 2.4 per cent expected one month earlier.

Household purchases, which account for about 70 per cent of the US economy, were revised down from a 3.4 per cent increase to a gain of 2.6 per cent. Business spending also showed little growth over the three-month period while exports declined.

Economists had expected the third estimate of the quarter’s growth to be held at 2.4 per cent.

TD Securities senior US macro strategist Millan Mulraine told the FT: “The lower consumption estimate provides some indication that the impact from fiscal austerity may have been more than previously thought, and that the economy started the year on weaker footing than previously estimated.”

The weaker GDP numbers could bolster hope that US Federal Reserve could delay plans to taper its $85bn-a-month bond-buying programme if the economy continues to improve as expected.

However, the data is backward-looking and recent consumer confidence, home sales and durable goods orders figures suggested underlying growth in the US is strong.

Close Brothers Asset Management chief investment officer Nancy Curtin says: “Growth may have been revised down slightly, but the US is demonstrating the type of economic improvement most of the western world would be jealous of, despite sequestration and tax rises.

“Future doubts over the strength of the recovery could well delay the Fed’s plan to put the brakes on QE later this year, but this revision by itself is not going to be significant enough to cause a U-turn in the Fed’s plan to put the brakes on QE later as we head into 2014.”