The U.S. economy is growing at a 1.2 percent annualized rate in the first quarter, based on latest data on domestic wholesale inventory and existing home sales this week, the Atlanta Federal Reserve’s GDPNow forecast model showed on Friday.

This was faster than the 0.4 percent pace for the first-quarter gross domestic product that the Atlanta Fed’s GDP program calculated on March 13.

U.S. GDP is forecast to expand at an annualized rate of 1.6 percent this quarter, down from the 2.6 percent in the fourth quarter of 2018, according to a Reuters poll of more than 100 economists released last week. In last month’s poll, first-quarter growth had been pegged at 1.9 percent.

Meanwhile, the Atlanta Fed said its nowcast of the contribution of inventory investment to first-quarter real GDP growth increased from -0.40 percentage points to -0.02 percentage points after Friday morning's wholesale trade release from the U.S. Census Bureau.

After Friday morning's existing-home sales release from the National Association of Realtors, the nowcast of first-quarter real residential investment growth increased from -4.8 percent to 0.6 percent. The next GDPNow update is Tuesday, March 26. 

However, the U.S. economy is already slowing, partly due to the fading of a major fiscal stimulus in 2018.

The New York Federal Reserve said one of its forecasting models pointed to a 1.29 percent growth rate in the first quarter. That's well below the 2.9 percent growth clocked in 2018, which was just below U.S. President Donald Trump's 3 percent growth target.

If the U.S. were to fall into recession, some economists have argued that the federal government’s giant budget deficit could limit its ability to support growth.

The federal government posted a $234 billion deficit in February, up from $215 billion a year earlier, the Treasury said in a monthly report. The fiscal situation has deteriorated following a large tax cut enacted in 2018, with the government running nearly $1 trillion into the red during the 12 months through February.

In another potential ding for the economic outlook, Commerce Department data showed U.S. wholesale inventories increased by the most in more than six years in January.

While that could boost the standard measure of economic growth during the first quarter, it could also be a sign that lackluster consumer purchases are leading goods to pile up on businesses’ shelves.

“(This) points to some weakness in final demand,” Barclays said in a note to clients.

As for Friday's economic data, home sales surged in February to their highest level in 11 months, a sign that a pause in interest rate hikes by the Federal Reserve was starting to boost the economy.

The National Association of Realtors said on Friday existing home sales jumped 11.8 percent to a seasonally adjusted annual rate of 5.51 million units last month.

That was the highest since March 2018 and well above analysts’ expectations of a rate of 5.1 million units. The one-month percentage change was the largest since December 2015. January’s sales pace was revised slightly lower.

February’s surge came as mortgage rates fell following signals from the Federal Reserve that it was no longer eyeing rate hikes. Several years of rising rates had put a brake on parts of the U.S. housing market in 2018.

“(It’s) quite a powerful recovery that’s taking place,” said Lawrence Yun, chief economist with the National Association of Realtors.

Still, the number of sales in February was 1.8 percent lower than a year ago.

The U.S. housing market has also been held back by land and labor shortages, which have led to tight inventory and more expensive homes.

The PHLX Housing Index extended losses following the release of the figures although its decline was less steep than the broader stock market.

The median existing house price increased 3.6 percent from a year ago to $249,500 in February.

Existing home sales rose in three of the country’s four major regions and were unchanged in the Northeast.

There were 1.63 million previously owned homes on the market in February, up from 1.59 million in January.

At February’s sales pace, it would take 3.5 months to exhaust the current inventory, down from 3.9 months in January. A supply of six to seven months is viewed as a healthy balance between supply and demand.