Growth is up—consumer spending and strong job markets are holding off recession.

Higher interest rates took a toll on the U.S. economy in early 2023, but free-spending consumers are keeping a recession at bay, at least for now.

Gross domestic product, adjusted for inflation, rose at a 1.1 percent annual rate in the first quarter, the Commerce Department said on Thursday. That was down from a 2.6 percent rate in the last three months of 2022 but nonetheless represented a third straight quarter of growth after output contracted in the first half of last year.

The figures are preliminary and will be revised at least twice as more complete data becomes available.

Growth in the first quarter was dragged down by weakness in housing and business investment, both of which are heavily influenced by interest rates. The Federal Reserve has raised rates by nearly five percentage points since early last year in an effort to tamp down inflation.

Consumers, however, have proved resilient in the face of both rising prices and higher borrowing costs. Inflation-adjusted spending rose at a 3.7 percent annual rate in the first quarter, up from 1 percent in the prior period. Spending on services such as travel and restaurant meals continued to rebound from pandemic lows. But spending on goods also rose after four straight quarters of declines.

Consumers have been buoyed by a strong job market and rising wages, which have helped offset high prices. After-tax income rose at an 8 percent annual rate in the first quarter, adjusted for inflation, though that was partly because of a cost-of-living adjustment that led to a big increase in Social Security payments in January.