In a major shock to economists, the Commerce Department released a report on Wednesday showing a substantial downward revision to the pace of U.S. economic growth in the first quarter of 2013.
The Commerce Department said its final reading on first quarter gross domestic product showed 1.8 percent growth, well below the previous estimate of a 2.4 percent increase.
The sharp downward revision to the pace of GDP growth came as a surprise to economists, who had expected the increase to be unrevised.
"Well, this was certainly unexpected and, I believe, rare," said Jennifer Lee, senior economist at BMO Capital, who noted the size of the revision is usually associated with the second estimate and not the third.
A notable downward revision to the increase in consumer spending contributed to the much weaker than previously estimated growth.
The report showed that consumer spending increased by 2.6 percent in the first quarter compared to the previously reported 3.4 percent increase.
A sharper than expected drop in investment on non-residential structures and a decrease in exports that was previously reported as an increase also contributed to the downward revision.
The downward revisions were partly offset by a revision to imports, which are now estimated to have edged down by 0.4 percent. Imports are a subtraction in the calculation of GDP.
Despite the significant downward revision, the pace of GDP growth in the first quarter still reflects a notable acceleration from the 0.4 percent growth seen in the fourth quarter.
Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "Until we see the monthly breakdown of the new consumption figures tomorrow, it is unclear exactly how these first-quarter revisions will affect our second-quarter GDP growth forecast, which is currently for a gain of between 1.5% and 2.0%."
"But it is possible that the downward revision to the first quarter will require an upward revision to the second quarter," he added.
On the inflation front, the Commerce Department's reading on core consumer prices, which exclude food and energy prices, rose by 1.3 percent in the first quarter, unchanged from the previous estimate.
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