U.S. Economy Expanded 1.8% in First Quarter

The U.S. economy grew at a 1.8 percent annual rate in the first quarter, less than forecast, reflecting a smaller gain in consumer spending than previously calculated.

The revised rise in gross domestic product was the same as estimated last month and compared with a 3.1 percent gain in the prior quarter, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 2.2 percent increase.

Consumer purchases fell short of forecasts, reflecting a smaller rise in spending on autos and utilities, and the revisions cut the fourth-quarter gain in wages by $24.6 billion, almost half, indicating a bleaker outlook for the biggest part of the economy. Even so, growing employment and exports may benefit manufacturers like Dow Chemical Co. (DOW) and sustain the expansion.

“Consumer spending was pretty anemic last quarter, and households are likely to be somewhat restrained going forward,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, who had forecast GDP would be revised to 1.9 percent. “One of the few things that remains strong is manufacturing, helped by the replacement cycle and foreign demand. Economic growth will run a little faster than the first quarter but nothing blockbuster.”

More Americans unexpectedly filed applications for unemployment benefits last week, a sign the labor market is struggling to gain momentum, another report showed today. Jobless claims increased by 10,000 to 424,000 in the week ended May 21, according to data from the Labor Department.