The economy grew at an annual rate of 1.8 percent in the first quarter, according to the Department of Commerce. The figure is the third estimate of GDP growth last quarter and is significantly lower than the first and second estimates of 2.5 and 2.4 percent, respectively.
New data showed consumer spending growth estimates to have fallen from 3.4 percent to 2.6 percent, leading to the downward revision. The new GDP figure came in well below consensus estimates, which had been at 2.4 percent, according to Bloomberg.
Still, a growth rate of 1.8 percent represents an acceleration from the fourth quarter's 0.4 percent. The acceleration was a result of consumer spending, investment in new homes and renovations, and increased business inventory investment.
Fiscal drag in the form of sequestration cuts are holding the economy back in 2013, as the spending cuts lead to government worker furloughs this summer. The cuts are expected to cut 1.4 percentage points from 2013 economic growth, according to analysis released Wednesday morning from TD Economics. However, the economy is expected to recover toward the end of the year and into 2014.
Meanwhile, Federal Reserve Chairman Ben Bernanke and many of his colleagues on the bank's Open Market Committee last week said they expect the economy to grow by 2.3 to 2.6 percent in 2013, growing to 2.9 to 3.6 percent by 2015. Faster growth and rapid improvements in the labor market would mean a quicker end to the Fed's stimulus program of monthly asset purchases, known as quantitative easing. However, some economists criticized the Fed's view as too optimistic. If GDP growth remains lackluster or slows, it could mean more money-printing from the central bank.