WASHINGTON -- The U.S. economy grew slightly faster at the start of the year than previously estimated, even though consumer spending posted the smallest gain in two years.
The gross domestic product expanded at an annual rate of 1.1 percent in the first quarter, an improvement from the 0.8 percent rate released last month, the Commerce Department reported Tuesday.
While growth prospects for the spring look even better, the shock waves from Britain's decision to leave the European Union could spread to the U.S. economy in the coming months. Economists forecast growth of around 2.5 percent in the current quarter.
The latest revision reflected stronger export sales and less drag from business investment. The rise in export sales helped turn trade from a drag on growth into a small positive to growth of 0.1 percentage point.
Offsetting those gains, consumer spending growth was revised down to 1.5 percent. That was the weakest showing since the first quarter of 2014. The result primarily reflected a slowdown in services such as health care.
"Because this revision was largely due to new March data, this suggests that the pace of growth increased slightly at the end of the quarter," economists at Contingent Macro Research said in a note to clients.
Economists are predicting growth in the current quarter will be more than double the first quarter pace.
Analysts had been expecting further acceleration in the second half of this year, with some economists predicting that growth could rise close to 3 percent. However, after the vote in Britain, many analysts have trimmed their forecasts for the second half to 2 percent to 2.5 percent growth because of turbulence in financial markets that could depress consumer and business confidence. They also believe U.S. growth will be hurt by a further rise in the value of the dollar, which will hurt exports.
The Dow Jones industrial average fell 610.32 points Friday, the first trading day after the British vote, the biggest loss since last August. The Dow fell another 260.51 points Monday.
A second economic report Tuesday showed U.S. consumer confidence rising this month to the highest level since October.
The Conference Board reported that its consumer confidence index rose to 98 in June from 92.4 in May, snapping a two-month losing streak. The survey measures how consumers assess current conditions as well as their outlook for the next six months.
Americans' view of current conditions was the most positive since September. Their expectations for the future also grew sunnier as did their outlook for the strength of the job market.
The survey was conducted before Britain voted Thursday to leave the European Union.
Economists monitor confidence surveys because consumer spending accounts for about 70 percent of U.S. economic activity.
"The underlying fundamentals for the consumer have been quite positive in recent months, as unemployment is low, incomes are rising at a solid pace, energy costs are below recent-year norms, borrowing costs are miniscule, and balance sheets are generally clean," Stephen Stanley, chief economist at Amherst Pierpont Securities wrote in a research note.
Other measures of consumer spirits have been mixed. The University of Michigan's index of consumer sentiment slipped this month.
A third economic report released Tuesday, the Standard & Poor's/Case-Shiller 20-city home price index, said U.S. home prices rose in April, with seven cities -- including Boston; Charlotte, N.C.; Portland, Ore.; San Francisco; and Seattle -- setting record highs.
The index increased 5.4 percent in April compared with a year earlier, just a tick down from the 5.5 percent annual gain in March.
Home values are now just 9.6 percent below their peak nearly a decade ago, according to the report.
Shrinking inventories of homes for sale have pushed prices higher, while a healthy job market and historically low mortgage rates have kept demand from potential buyers strong during the spring months associated with the highest volume of sales.
The number of listings has fallen 5.7 percent from a year ago, the National Association of Realtors said last week.
Home prices rose in all 20 major housing markets, with double-digit annual increases in Portland and Seattle.
"While strong price growth in these markets should help increase inventory in the coming months, homes will be significantly less affordable for homebuyers than this time last year," said Ralph McLaughlin, chief economist at the online real estate service Trulia.
Information for this article was contributed by Josh Boak of The Associated Press.
Business on 06/29/2016