U.S. Economy Stronger Than Expected in 1st Quarter 2023

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The U.S. economy was stronger than expected during the first three months of the year despite rising interest rates and other economic headwinds. According to the third and final estimate for real gross domestic product (GDP) recently released by the Bureau of Economic Analysis, real GDP grew at an annual rate of 2% in 1st quarter 2023. That was revised up from the second estimate of 1.3% and up from the first estimate of 1.1%. While the final 1st quarter estimate was above expectations (1.4%), it was below the annualized expansion rate of 2.6% in 4th quarter 2022. The deceleration in real GDP from 4th quarter to 1st quarter primarily reflected a downturn in private inventory investment and a slowdown in nonresidential fixed investment that were partly offset by an acceleration in consumer spending, an upturn in exports and a smaller decrease in residential fixed investment. The recent estimate for 1st quarter 2023 real GDP was based on more complete source data than was available with previous estimates and primarily reflected an upward revision to exports and consumer spending. Those increases were partly offset by decreases in nonresidential fixed investment and federal government spending.