The U.S. economy’s annual growth rate for the first three months of 2013 was revised down from 2.4 percent to 1.8 percent. Consumers spent less than the Commerce Department originally estimated, causing the revision. This decrease in spending could be attributed to rising social security taxes, which went into effect Jan. 1.
The revised January-March quarter estimated rate is still higher than the 0.4 percent estimate in the October-December 2012 quarter. Additionally, the estimate for the April-June quarter—originally stated at 2 percent or less—is expected to change with this revision.
Originally, it was thought that the tax increase would begin to impact the economy in the second quarter of 2013. Growth was expected to rebound to a rate of approximately 2.5 percent in the third quarter, and jump to more than 3 percent in the October-December quarter.
The Federal Reserve now projects a 2.3- to 2.6-percent increase this year, as the unemployment rate declines, home sales and prices rise, and second-quarter retail spending increases.