USA economic growth slows to 2.3 pct in first quarter

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US economic growth cooled last quarter as consumers pulled back following outsize spending in the prior period, though solid business investment cushioned some of the weakness. That was offset somewhat by gains in inventory building by businesses and a lower trade deficit. Trade added 0.2 percentage point to growth, while inventories added 0.43 point, a reversal from the prior quarter, when they subtracted a combined 1.69 points.

The Fed, which wants to keep price increases to about 2 percent annually, raised short-term interest rates in March for the sixth time since 2015 when they were near zero.

Economists expect growth will accelerate in the second quarter as more households feel the impact of the Trump administration's $1.5 trillion income tax package on their paychecks.

"It is possible this means that there is a lag in the consumer response to tax cuts". Inflation, as measured by the PCE price index rose at a 2.7% annual rate in the first quarter.

Federal Reserve officials are likely to shrug off the first-quarter performance. Remember, the US central bank raised interest rates last month in affirmation of the strong economy and labor market and they forecast at least two additional rate hikes this year. The GDP estimate is the first of three for the quarter, with the other releases scheduled for May and June when more information becomes available.

Due to what is known as a "seasonal quirk", it is not unusual for first-quarter growth to be sluggish and possibly not an accurate reflection of the economy.

In a separate report in Friday, the Labor Department said wages and salaries shot up 0.9 percent in the first quarter.

The economy grew at a 2.9 percent pace in the fourth quarter.

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That seemed at odds with Thursday's Census Bureau report that nondefense capital goods orders, excluding aircraft, fell 0.1 percent in March and that preliminary results from earlier months had been revised lower.

GDP is the value of goods and services that an economy creates over a period of time and its growth is an important indicator of the health of the world's largest economy.

The U.S. central bank has a 2 percent inflation target.

"I would not lose sleep over first-quarter GDP, there is the residual seasonality issue", said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.

The dollar initially rose against a basket of currencies after the data, but gave up gains to trade little changed.

The increase in first-quarter real GDP reflected positive contributions in several areas, including exports, private inventory investment and government spending, according to the report. Other figures April 27 cast a shadow over the strong, synchronized global upswing: Europe's economy lost momentum in the first quarter as expansions slowed from the United Kingdom to France, partly because winter storms ripped through the region. This was driven in part by a slowdown in discretionary categories like shoes, apparel and cars, as well as food and beverages. This likely reflects delayed tax refunds.

Muted household spending contributed to the drop-off. The cooling in equipment investment comes as the stimulus from a recovery in commodity prices is fading.

Housing construction, which had surged in the fourth quarter after two quarters of declines, was flat in the first three months of this year.

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