A drop in government spending dragged more on the U.S. economy than initially thought in the first three months of the year, although consumer spending looked relatively resilient to Washington's austerity drive.
Other reports on Thursday showed the number of new jobless claims rose modestly last week while contracts on previously owned homes climbed to a three-year high in April.
Together, the reports pointed to an economy that has held up reasonably well despite government constraints, but nevertheless faced headwinds severe enough to dissuade the U.S. Federal Reserve from trimming its monetary stimulus in the immediate future.
"(The reports) paint the picture of an economy with strengthening fundamentals that is facing significant fiscal drag," said Ellen Zentner, an economist at Nomura in New York.
Gross domestic product, a measure of the country's total economic output, expanded at a 2.4pc annual rate during the first quarter, down a tenth of a point from an initial estimate, the Commerce Department said.
Analysts had forecast a 2.5pc gain.
Government spending tumbled at a 4.9pc annual rate, which was faster than the 4.1pc rate initially estimated. Also holding back growth during the quarter, businesses outside the farm sector stocked their shelves at a slower pace.
Washington has been tightening its belt for several years but ramped up austerity measures in 2013, hiking taxes in January and slashing the federal budget in March.
"We are dramatically under-spending in Washington," said Michael Strauss, a market strategist at Commonfund in Wilton, Connecticut.