By Harriet Torry and Paul Kiernan

WASHINGTON-The pace of U.S. economic growth remained at a strong 3.1% annual rate in the first three months of the year, but a downward revision to consumer spending suggests the momentum could be difficult to maintain in the second quarter.

Gross domestic product, a broad measure of the goods and services produced across the U.S., rose at a 3.1% seasonally and inflation-adjusted annual rate in January through March, the Commerce Department said Thursday.

The agency previously estimated last quarter's growth rate was 3.1%. Economists surveyed by The Wall Street Journal had expected that figure to be unrevised in the latest report.

The pace of growth in the first quarter was much stronger than the 2.2% rate in the fourth quarter of last year. Still, economists project growth is slowing in the second quarter of this year. Both the Atlanta Fed's GDPNow real-time growth model and forecasting firm Macroeconomic Advisers projected a 1.9% growth rate in forecasts released Wednesday.

Sectors of the economy tied to trade, manufacturing and housing appear to be struggling with uncertainties related in part to overseas trade tensions. Slowing global growth and weak inflation are also clouding the outlook for the rest of the year, prompting the Federal Reserve to signal it might cut short-term interest rates in the months ahead to give the economy a boost.

The revised data released Thursday showed consumer spending rose at a slower rate last quarter than previously estimated, while business investment, exports and government spending rose at a quicker pace.

Here are highlights of the revisions:

--Consumer spending, which accounts for more than two-thirds of U.S. economic output, grew at a 0.9% annual rate in the first quarter, compared with a prior estimate of 1.3%. That was a sharp slowdown from the fourth quarter, when spending increased at a 2.5% rate.

--Weaker consumer spending was driven by a lower outlays on services than previously thought. Services spending increased at a 1% annual rate, down from an earlier estimate of a 2.1% pace.

--A measure of business investment, fixed nonresidential investment, rose at an 4.4% rate, well above the prior reading of 2.3%. Business investment was strong last year, indicating companies were responding to tax-law changes, and it grew at a 5.4% rate in the fourth quarter. The slightly smaller gain at the start of this year suggests that effect could be fading.

--U.S. exports increased at a 5.4% rate, versus a prior estimate of 4.8%. Imports, which subtract from the calculation of GDP, declined at 1.9% rate, a slightly smaller decrease than the prior estimate of a 2.5% decline. Trade still boosted first-quarter growth by 0.94 percentage point after proving a strong headwind in the third quarter and broadly neutral in the fourth.

--A buildup in private nonfarm inventories remained a driver of first-quarter growth, contributing 0.56 percentage point to the overall 3.1% growth rate. That was a slightly smaller contribution than previously estimated. High inventory levels can curtail future production if they're not drawn down by demand from consumers and businesses.

--Spending on home building and improvements fell at a 2% rate, versus a prior reading of a 3.5% decline. The category has declined for five straight quarters as high home prices and low inventory appear to be challenging the housing market.

--Spending at all levels of government rose at an 2.8% rate, above the prior estimate of 2.5%.

Thursday's report also revised estimates of corporate profits for the quarter.

After-tax corporate profits without adjustments for inventory valuation and capital consumption, a measure of profits that quarter, declined at an 0.2% rate in the first quarter from the prior quarter. The previous estimate was for a 0.8% decline. The first-quarter drop was less than in the fourth quarter, when profits declined 1.7%.

Compared with a year earlier, profits without inventory valuation and capital consumption adjustments climbed 2.3% in the first quarter.

A separate measure, after-tax profits with inventory valuation and capital consumption adjustments, fell at a 2.6% rate from the prior quarter. The previous estimate was for a 2.8% decline.

The Commerce Department's release on GDP can be found at: http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

(END) Dow Jones Newswires

June 27, 2019 08:45 ET (12:45 GMT)

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