The U.S. economy expanded at a 1.8% annualized pace in the first quarter, falling short of market expectations as household spending lost momentum and business investment eased. The latest reading points to a cooler start to the year after a period of stronger growth.

Consumer demand, a key driver of the economy, softened as higher borrowing costs continued to weigh on households and companies. Slower investment also added to the drag, reinforcing concerns that tighter monetary conditions are filtering through the real economy.

The report suggests the economy remains in expansion, but at a noticeably slower rate than many analysts had anticipated. With growth cooling and interest rates still elevated, policymakers and investors will be watching upcoming data for signs of whether the slowdown deepens or stabilizes.

Economic growth is often shaped by spending patterns, credit conditions, and business confidence. This quarter’s weaker performance highlights how sensitive the U.S. recovery remains to interest-rate pressures and shifting consumer behavior.