The pace of America's economic growth slowed in the first quarter, though it remains stronger than economists had predicted.
The US economy grew at a rate of 2.3% in the first quarter, according to the Commerce Department's preliminary report on Friday. That's slower than the 2.9% growth rate in the fourth quarter of 2017. Economists surveyed by FactSet had expected a 2% growth rate
The pace of growth is solid, though less than the 4% President Donald Trump had promised during his presidential campaign.
"It was good but not great," said PNC chief economist Gus Faucher.
Muted household spending contributed to the drop-off.
Consumer spending, which accounts for more than two-thirds of the economy, grew only 1.1% last quarter, its weakest pace in nearly five years.
Last quarter, spending grew 4%. Economists believe spending rose toward the end of last year in anticipation of tax cuts and as hurricane-damaged areas of the country recovered and spent more on cars.
Congress passed a $1.5 trillion tax cut at the end of 2017. The sluggish consumer spending demonstrates consumers are not yet fully feeling the effects of the tax cuts.
"It's kind of ironic that we've had a slowdown in consumption and investment just as the tax cuts are taking effect," said Michael Pearce, a senior economist at Capital Economics. Pearce attributed the more modest spending to seasonal effects and a pullback after the holiday shopping season. The winter months have been the weakest quarter of the year for several years.
Pearce believes the tax cuts will provide a boost to disposable income in the near term, and it's dangerous to read too closely into a single data point.
"With consumption growth likely to bounce back and fiscal stimulus about to kick-in big-time, there are probably more upside than downside risks," Brian Coulton, chief economist at Fitch Ratings, said in an email.
Weak consumer spending offset strong business investment and growing American exports.
Despite the slower growth, the US economy remains in strong shape. Unemployment is at 4.1%, the lowest in 18 years. It's close to what economists consider full employment. Business and consumer confidence remain high.
"Economists across the street seem to agree that there is unlikely to be anything sinister going on behind the slowdown," Morgan Stanley economists said in a research report. They expect a bounce back in the coming months, and preliminary estimates point to 3.6% growth in the second quarter.
The growth number also comes in the middle of a trade spat between the United States and China. President Trump has said he is considering hitting China with up to $150 billion worth of tariffs. Chinese officials have threatened to apply tariffs on $50 billion of US exports, including pork and soybeans.
Trump's trade team is also renegotiating NAFTA, the trade pact between the United States, Canada and Mexico.
CNNMoney (New York) First published April 27, 2018: 8:41 AM ET