The U.S. economy expanded at a 2.1% annual rate in the first quarter, according to an updated government report. That figure is higher than the initial estimate of 1.6% growth.
On the surface, the revision suggests stronger economic activity. Yet the details behind the number reveal a more complicated picture.
Much of the upward revision came from a surge in business inventories. Companies stocked up on goods, a move that can signal caution rather than confidence.
Consumer spending, a primary driver of the economy, actually grew more slowly than first reported. Spending increased at a 1.5% rate, down from the earlier 2% estimate.
Trade also dragged on growth more than initially thought. Exports fell while imports rose, widening the trade deficit.
The mixed data leaves economists uncertain about the underlying momentum. The inventory buildup may simply reflect companies preparing for potential supply disruptions.
Inflation pressures also persisted during the quarter. The Federal Reserve’s preferred inflation measure rose at a faster clip than previously reported.
The report underscores a fragile economy. Solid headline growth masks weaknesses in key areas like consumer demand and trade.
Looking ahead, the second quarter faces headwinds from higher interest rates and lingering price pressures. Growth could slow further.
