The U.S. economy expanded at a slower than expected pace in the first quarter, mainly due to a decline in defense spending that undercut the biggest increase in consumer spending in two years. Gross domestic product advanced at an annualized rate of 2.5%, compared to a market consensus of 3%. However, in the final quarter of 2012, GDP grew at a much lower rate of 0.4%.
While defense spending dropped an annualized 11.5% in Q1, following a 22.1% slump in Q4 2012, consumer spending, the biggest part of the economy, increased at a 3.2% rate (consensus 2.8%), the most since Q4 2010, boosted by a rebound in stockpiling and a gain in residential construction. The estimate is the first of three for the quarter, with the other releases scheduled for May and June when more information becomes available.