US growth slows more than expected in the first quarter

GDP rose 1.1% on an annualised basis on the back of strong consumer spending

US economic growth slowed in the first quarter by more than expected as tepid business investment and a pullback in inventories tempered a rise in consumer spending.

The figures illustrate economic growth that is gradually downshifting under the weight of Fed interest rate hikes and elevated inflation. While the economy bounded ahead at the start of the year, helped in part by unseasonably warm weather, households and businesses pulled back on spending as the quarter progressed.

The inflation and consumer spending figures is likely to keep the Fed on track to raise interest rates by a quarter percentage point next week. First Republic Bank’s continuing struggles, however, do raise the possibility that the central bank could pause. Separate data out on Thursday showed applications for unemployment benefits fell for the first time in three weeks. Continuing claims, which can offer insight into how quickly out-of-work Americans are able to find a new job, were largely unchanged.The economic slowdown is expected to be more evident in the second quarter, with economists forecasting GDP to grow at a stall-speed pace of 0.2%.

The GDP data showed services spending rose at a 2.3% annualised rate, led by healthcare and restaurants and hotels. Outlays on goods increased at a 6.5% rate, the most in nearly two years. Inflation-adjusted spending data for March, and any revisions to prior months, will also be released Friday.

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