U.S. economic growth slowed dramatically in the first three months of 2023, according to data released Thursday by the Bureau of Economic Analysis (BEA). 

Gross domestic product (GDP), the measure of all goods and services produced, rose at an annualized rate of 1.1 percent in the first quarter, federal officials estimated. That’s down from 2.6 percent in the fourth quarter of 2022. 

Economists had forecasted the nation’s GDP to grow at an annualized rate of 2 percent in the first quarter. Analysts cautioned that much of the growth took place in January thanks in part to usually warm weather, but economic activity began to fall off fast in March. 

While retail sales fell in March as inflation and higher borrowing costs hit consumers, household spending still rose 3.7 percent during the first quarter from the last three months of 2022.

Even so, business investment plunged 12.5 percent between the end of last year and the beginning of 2023, sapping strength from the economy.

From here, economists largely expect economic growth to deteriorate rapidly. The Conference Board forecasts U.S. GDP to contract 1.8 percent in the second quarter amid fears of a looming recession. 

Consumer demand is finally cooling after years of elevated inflation and a flurry of Federal Reserve interest rate hikes aimed at slowing the economy. Banks are pulling back on commercial lending following the failure of Silicon Valley Bank, slowing the growth of businesses that rely on financing.

Updated at 8:38 a.m.