NEW YORK, May 28 (Xinhua) -- U.S. economic growth in the first quarter was significantly weaker than initially estimated, while consumer inflation remained elevated in April, official data showed Thursday.
GDP expanded at an annual rate of just 1.6 percent in the first quarter, according to a revised reading from the Commerce Department. The figure represents a sharp downgrade from the initial estimate of 2.0 percent, missing market consensus expectations that the earlier estimate would hold.
"Losing four tenths from the previous reading, you don't often see a drop that big, so this is pretty remarkable news," Dan North, a senior economist with Allianz Trade Americas, told local media.
Meanwhile, inflation continued to hit consumer wallets. The personal consumption expenditures price index, which serves as the Federal Reserve's preferred inflation gauge, increased by a seasonally adjusted 0.4 percent in April month on month. This puts the 12-month inflation rate at 3.8 percent, the department reported.
When excluding volatile food and energy costs, the core PCE price index rose 0.2 percent for the month and 3.3 percent annually. The monthly figure came in slightly below economists' estimate of 0.3 percent.
"Inflation has been rising — which is no surprise — but this morning's GDP numbers were very disappointing, with only a 1.6 percent increase in the first quarter, revised much lower than the initial 2.0 percent reading," said Chris Zaccarelli, chief investment officer at Northlight Asset Management, in a note. "We are far from stagflation, but rising inflation coupled with slowing growth is the opposite of what we want in both dimensions."
Despite the softer GDP reading and persistent inflation, U.S. consumer spending increased by 0.5 percent in April, meeting market forecasts. However, personal income remained flat, missing estimates for a 0.4 percent rise and signaling continued strain on household finances.
The fresh pricing data is expected to keep the Fed on the sidelines until the current wave of inflation subsides. Traders currently expect the central bank to remain on hold until at least late 2026, with markets pricing in the likelihood that the Fed's next policy move will be an interest rate increase, possibly in early 2027. ■