WASHINGTON — He growth from economy US was weaker than expected in the first quarter, up to an annualized rate of 1.6%, compared to 3.4% in the fourth quarter of 2023, according to the first estimate from the Department of Commerce, released on Thursday.
Analysts expected gross domestic product (GDP) growth of 2.2% between January and March, according to the Market Watch consensus. The United States publishes its growth at an annualized rate, which compares GDP with that of the previous quarter and then projects the variation for the entire year at the rate of those three months.
In comparison with the last quarter of 2023, the economy expanded just 0.4% in the first quarter of the year.
President Joe Biden, who is seeking re-election, welcomed the “regular and stable growth” in a statement.
“But we have more work to do. The costs are too high for working families and I am fighting to lower them,” he said, in an expression that he has systematically reiterated with inflation and GDP data, but the economy continues to hit households since Biden arrived at the White House.
High prices
The slowdown in the pace of growth occurred “mainly due to the decline in consumer spending, exports, and state and local public spending,” explained the Department of Commerce.
Family consumption continues to be the engine of growth in the world’s largest economy. Although households consumed more services such as health care, financial services or insurance, they spent less money on purchasing goods.
There was also a drop in federal government spending, according to the report.
Consumers, the Government added, remain willing to spend “although they are more cautious in the face of high prices,” said EY chief economist Gregory Daco.
“Looking ahead, we see the economy cooling gently as moderating labor demand (and) wage increases, persistent inflation and tight credit conditions limit private sector activity,” he added. .
Rate expectations
The growth of the United States economy surprised in 2023, with figures much higher than expected in a context of high interest rates to combat inflation. High rates are precisely aimed at making credit more expensive and thus cooling consumption and investment, thus lowering pressures on prices.
Last year, GDP expanded 2.5% compared to 1.9% in 2022, supported by solid consumption.
And for this year, the Federal Reserve raised its projections at its last meeting in mid-March, to 2.1% growth versus the 1.4% it expected before.
The IMF was also more optimistic about US GDP than three months ago, with an expectation of 2.7% expansion compared to 2.1% in January, according to its updated economic forecasts published last week.
“Weak GDP growth in the first quarter will likely set the tone for the rest of 2024,” according to Ian Shephredson, chief economist at Pantheon Macroeconomics.
A rebound in inflation in the first months of the year makes the market expect that high rates, in a range of 5.25-5.50% decided by the Fed, will remain at least until September.
The central bank will hold its next monetary policy meeting next week.
On Friday, inflation data should be released based on the PCE index, the one most followed by the Federal Reserve, which is as key as employment data in its interest rate decisions.
Source: With information from AFP
