The US economy was even stronger than we thought in the first quarter

US economic growth in the first quarter was stronger than previously reported, according to the Commerce Department’s third and final estimate released Tuesday.

Gross domestic product was 1.1%, revised up from the second estimate of 0.8%, and topping economists’ forecasts for 1% growth.

But there was a significant downward revision to personal consumption, which contributes to about 70% of growth. It was dropped to a two-year low of 1.5%, from 1.9%. Economists had expected an upward revision to 2%.

Corporate profits were revised higher, and overall gross domestic income was lifted to 2.9%, from the prior print of 2.2%. And business spending on intellectual property products like software grew 4.4%, but had been released earlier as -0.2%.

The more complete data available to the Commerce Department also showed that the gap between exports and imports was narrower than previously thought.

“In Q2, it appears that US growth has taken a step up,” said Renaissance Macro’s Neil Dutta in a note.

“We’re tracking real GDP between 2.5 to 3.0%. GDI is likely stronger as well given the growth in employee compensation and rebound in corporate profits,” Dutta wrote.

First-quarter growth has been below trend for the last five years, revised by up to 0.6 percentage points. This has prompted some economists to question the Bureau of Economic Analysis’ methodology.

The notable change in the second estimate was to business inventories, which reflected a weaker drag on growth than previously reported. Also, wage growth was revised upwards.

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