The U.S. economy grew at an annual rate of 1.8 per cent in the first three months of the year, significantly slower than first thought. The steep revision was mostly because consumers spent less, suggesting higher taxes are having a deeper impact on economic growth.

The Commerce Department revised the annual growth rate for the January-March quarter down from its last estimate of a 2.4 per cent. The rate was still faster than the 0.4 percent rate in the October-December quarter.

Economists had thought growth in the April-June quarter would be 2 percent or less, although the revision will likely change those estimates. They had also expected growth to strengthen in the second half of this year.