WASHINGTON, DC — US economic growth in the first three months of the year was faster than previously estimated, the Commerce Department reported on Thursday. But it’s still tepid.

Gross domestic product, the broadest measure of economic output, increased at an annualized rate of 1.3% in the first quarter, up from an initial estimate of 1.1% reported last month. GDP is adjusted for inflation and seasonality.

The change was mostly driven by an upward revision to inventory investment, which includes finished goods, materials, or works in progress being saved for a later date.

Despite the first-quarter slowdown, consumer spending, which accounts for around 70% of America’s economic output, rose at a 3.8% annual pace, the most in nearly two years and an encouraging sign of household confidence. Specifically, spending on physical goods, like appliances and cars, rose 6.3%, also the fastest growth rate since April-June of last year.

A cutback in business inventories shaved 2.1 percentage points off January-March growth.

The steady slowdown in economic growth is a consequence of the Federal Reserve’s aggressive drive to tame inflation, with 10 interest rate hikes over the past 14 months. Across the economy, the Fed’s rate increase have elevated the costs of auto loans, credit card borrowing and business loans.

With mortgage rates having doubled over the past year, the real estate market has already taken a beating: Investment in housing fell at a 0.2% annual rate from January through March. In April, sales of existing homes were 23% below their level a year earlier.

As the Fed’s rate hikes have gradually slowed growth, inflation has eased from the four-decade high it reached last year. Still, consumer prices were still up 4.9% in April from a year earlier — well above the Fed’s 2% target.

The economy’s slowdown is widely expected to lead to a recession later this year. For now, though, most sectors of the economy other than housing are showing surprising resilience. Retail sales have continued to rise. So have orders for manufactured goods.

Most significantly, the nation’s job market remains fundamentally solid. In April, employers added 253,000 jobs, and the unemployment rate matched a 54-year low. The pace of layoffs remains comparatively low. And job openings, though declining, are still well above pre-pandemic levels.