US growth cools in first quarter as recession fears deepen

US economic growth lost steam in the first quarter this year, said the Commerce Department on Thursday, as the possibility of a mild recession brews while consumer spending weakens.

Consumption has provided a boost to the world's biggest economy, giving it a strong start to 2023, but recent banking sector turmoil and rising interest rates are likely to weigh on the outlook.

US gross domestic product rose at an annual rate of 1.1 percent in the January to March period, down from 2.6 percent in the fourth quarter last year.

"Compared to the fourth quarter, the deceleration in real GDP in the first quarter primarily reflected a downturn in private inventory investment and a slowdown in nonresidential fixed investment," said the Commerce Department.

It added that this was partly offset by an acceleration in consumer spending and an upturn in exports.

The GDP growth figure "reflected increases in consumer spending, exports, federal government spending," along with some forms of investment, said the department in a statement.

Economic activity has been easing as the US central bank rapidly hiked the benchmark lending rate to tackle stubborn inflation, while the full fallout from recent financial sector unrest –- following the failures of three midsized lenders last month -– is yet to be seen.