U.S. first-quarter GDP growth revised higher as consumer spending weakens

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US GDP growth revised

Highlights

U.S. first-quarter GDP growth is revised up to 2.1% annualized, versus 1.6% initially reported, mainly due to lower imports.
Consumer spending growth is sharply downgraded to 0.5% from 1.4%, with financial services and travel outlays providing major drags.
Business investment in equipment rises at a 15.8% rate, profits from current production increase at a $74.4 billion pace in Q1.

Revised growth data and demand mix

According to Reuters, as reported by the U.S. Commerce Department's Bureau of Economic Analysis, gross domestic product increases at a 2.1% annualized rate in the first quarter in its third estimate, up from the previously reported 1.6% pace and above economists' expectations for no revision.

The economy grows at a 0.5% rate in the October-December quarter. The 0.5 percentage point upgrade in first-quarter growth reflects a downward revision to imports, mostly consumer and capital goods, which lifts the headline figure.

That support is partly offset by a sharp downgrade to consumer spending. Growth in consumer spending is cut to a 0.5% rate from the previously reported 1.4%, reflecting downward revisions to services outlays, including financial services and insurance as well as international travel.

Part of the downgrade in financial services is linked to a stock market selloff in the quarter. Final sales to private domestic purchasers, which exclude government, trade and inventories and are often viewed as a measure of underlying demand, increase at a 1.7% rate, down from the previously estimated 2.4%.

Business investment and broader economic signals

Spending appears to pick up early in the second quarter, helped by large tax refunds that partly offset a rise in gasoline prices tied to the U.S.-led war with Iran. The average tax refund for the week ending May 8 is $3,276, compared with $2,939 in the week ending May 9, 2025, based on the latest available Internal Revenue Service data cited in the report.

Overall activity is mostly driven by artificial intelligence-related spending. Business investment in equipment increases at a 15.8% rate, revised down from 17.2%, while outlays on intellectual property products rise at a 13.8% pace, revised up from 11.6%.

Profits from current production rise at a $74.4 billion rate in the quarter, revised up from the previously reported $40.4 billion pace, though below the $246.9 billion surge in the fourth quarter. Measured from the income side, gross domestic income grows at a 1.2% rate, revised up from 0.9%, and the average of GDP and GDI, known as gross domestic output, increases at a 1.7% rate, revised from 1.3%.

In our earlier article on Micron’s earnings surge, we noted that a sharp revenue beat and stronger guidance were driven by rising demand for memory used in AI data centers. We also highlighted how long-term customer agreements could make Micron’s historically cyclical business more predictable, reinforcing the message that AI infrastructure spending is translating into tangible revenue across the chip supply chain.

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