The softer-than expected print is a sign that the Federal Reserve's historic interest rate hikes are putting pressure on consumers and the economy. Investors have been closely watching economic data releases for clues on when the central bank will begin to lower rates.
For the quarter, personal consumption growth declined to 2.5% from 3.3% in the prior quarter. Economists had expected a 3% increase.
"Compared to the fourth quarter, the deceleration in real GDP in the first quarter primarily reflected decelerations in consumer spending, exports, and state and local government spending and a downturn in federal government spending," the BEA said in its release. "These movements were partly offset by an acceleration in residential fixed investment. Imports accelerated."
The slower than projected economic growth came alongside a surprisingly high inflation reading. The "core" Personal Consumption Expenditures index, which excludes the volatile food and energy categories, grew by 3.7% in the first quarter, above estimates for 3.4%, and significantly higher than 2% gain seen in the prior quarter.