The U.S. economy is growing at a 1.7 percent annualized rate in the first quarter, based on latest data on consumer spending, the Atlanta Federal Reserve’s GDPNow forecast model showed on Friday.

This was faster than the 1.5 percent pace for the first-quarter gross domestic product that the Atlanta Fed’s GDP program calculated on Thursday.

A decrease in the nowcast of first-quarter real personal consumption expenditures growth from 0.9 percent to 0.5 percent after Friday morning’s personal income and outlays release from the U.S. Bureau of Economic

Analysis was more than offset by increases in the nowcasts of real nonresidential equipment investment growth, real residential investment growth, and the contribution of inventory investment to first-quarter real GDP growth.

The next GDPNow update is Monday, April 1. 

U.S. consumer spending barely rose in January and income increased modestly in February, suggesting the economy was fast losing momentum after growth slowed in the fourth quarter.

The report from the Commerce Department on Friday also showed price pressures muted in January, with a measure of overall inflation posting its smallest annual increase in nearly 2-1/2 years. The Federal Reserve last week brought its three-year campaign to tighten monetary policy to an abrupt end.

The U.S. central bank abandoned projections for any interest rate hikes this year after increasing borrowing costs four times in 2018, in a nod to the slowing economy, low inflation and rising headwinds to growth.

“Domestic demand is clearly now slowing and, with the fiscal boost having faded and higher interest rates taking a heavier toll, we expect that to continue,” said Andrew Hunter, a senior U.S. economist at Capital Economics.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, edged up 0.1 percent as households cut back on purchases of motor vehicles. Data for December was revised down to show consumer spending falling 0.6 percent instead of the previously reported 0.5 percent.

Economists polled by Reuters had forecast consumer spending increasing 0.3 percent in January. The release of the January consumer spending figures was delayed by a five-week partial shutdown of the federal government that ended on Jan. 25.

When adjusted for inflation, consumer spending gained 0.1 percent in January after dropping 0.6 percent in December.

The dollar was trading lower against a basket of currencies. U.S. Treasury prices fell, while stocks on Wall Street rose.

WEAK DATA STREAM

The weak consumer spending report extended the run of soft data ranging from housing starts to manufacturing that have flagged a sharp slowdown in growth early in the first quarter. The economy is losing steam as the stimulus from $1.5 trillion in tax cuts as well as increased government spending dissipates.

The outlook is also being overshadowed by slowing global growth, Washington’s trade war with China and uncertainty over Britain’s departure from the European Union.

Gross domestic product forecasts for the first quarter are as low as a 0.9 percent annualized rate. The economy grew at a 2.2 percent pace in the fourth quarter after expanding at a brisk 3.4 percent rate in the July-September period.

But the Fed’s decision to shelve further monetary policy tightening could prop up the interest-rate-sensitive housing market.

A second report on Friday from the Commerce Department showed new home sales rose 4.9 percent to a seasonally adjusted annual rate of 667,000 units in February, the highest level since March 2018.

The housing market, however, accounts for a small fraction of the economy. A recovery in the sector, which hit a soft patch last year, will probably not be enough to blunt the impact on growth from slowing consumer spending and manufacturing.

In January, spending on goods fell 0.2 percent after dropping 2.4 percent in December. It was the second straight monthly drop in spending on goods and reflected a decrease in motor vehicle purchases.

Outlays on services rose 0.2 percent as consumers paid more for financial services and insurance. Spending on services increased 0.3 percent in December.

With demand softening, inflation pressures were tame in January. The personal consumption expenditures (PCE) price index fell 0.1 percent, reversing December’s 0.1 percent gain.

In the 12 month through January, the PCE price index rose 1.4 percent. That was the smallest rise since September 2016 and followed a 1.8 percent increase in December.

Excluding the volatile food and energy components, the PCE price index ticked up 0.1 percent in January after rising 0.2 percent in the prior month. That lowered the year-on-year increase in the so-called core PCE price index to 1.8 percent from 2.0 percent in December.

The core PCE index is the Fed’s preferred inflation measure. It hit the central bank’s 2 percent inflation target in March last year for the first time since April 2012.

In February, personal income increased 0.2 percent after dipping 0.1 percent in January. Incomes have been volatile in recent months because of one-off factors, including government payments to farmers caught in the trade war between the United States and China.

Wages rose 0.3 percent in February, matching January’s gain. There were also increases in proprietors’ income and social security payments, but interest payments on incomes fell.

Savings decreased to $1.19 trillion last month from $1.22 trillion in January.