The US economy grew at a slower pace than initially estimated during the first quarter. The Bureau of Economic Analysis’s second estimate of Q1 US gross domestic product (GDP) reported an annualized growth rate of 1.3%, revised down from the 1.6% first reported in April, consistent with economist expectations.
The revised report of the US Economy also revealed that consumer spending, the primary engine of the economy, grew at a 2% rate instead of the previously reported 2.5%. This follows household spending increases of over 3% in the preceding two quarters.
Source: BUREAU OF ECONOMIC ANALYSIS
GDP might partially rebound in the second quarter. Recent forecasts suggest the US economy could have grown by 3% or more, aligning with the last two quarterly readings of 2023.
Inflation remained relatively stable. The personal-consumption-expenditures price index, the Federal Reserve’s preferred measure, rose at a 3.3% rate, slightly lower than the initial estimate. Gross business investment maintained a robust 3.2% growth rate, consistent with the previous estimate. Corporate profits decreased by 0.6%, marking the first decline in four quarters. This dip in profits may be due to consumers’ reluctance to continue paying higher prices.
Current-dollar GDP rose 4.8% annually, or $327.5 billion, reaching $28.28 trillion in Q1, compared to a 5.1% increase, or $346.9 billion, in Q4. Despite the weaker headline figure, Nationwide financial markets economist Oren Klachkin pointed out solid underlying momentum, with a 2.5% annualized growth in private domestic sales to domestic purchasers.
The GDP slowdown comes amid concerns of overheating, which could exacerbate inflation, a key worry for the Federal Reserve. Nonetheless, many forecasters expect the first-quarter slowdown of the US economy to be temporary. Goldman Sachs predicts 3.2% annualized growth for Q2, while the Atlanta Fed’s GDPNow forecaster projects 3.5%.
Klachkin foresees continued economic expansion with steady GDP gains this year and robust growth in 2024.
