The revised figure, released Thursday by the Commerce Department, marked a dramatic improvement in its assessment of first-quarter growth from its previous estimate of a 1.3% annual rate.
Despite this rebound, the third and last government report on economic growth for the first three months of 2023 implied a slowdown compared to the annual rate of 2.6% registered between October and December and 3.2% in July. To september. The economy has been held back by the Federal Reserve’s determined campaign to control the rate of inflation through a series of interest rate hikes beginning early last year.
However, Thursday’s report on the nation’s gross domestic product — the total output of goods and services — showed why the economy has so far managed to defy expectations of a coming recession: Consumers continue to spend despite soaring loan costs. Its spending, which feeds around 70% of the economy, rose at an annual rate of 4.2% in the January-March quarter, the highest since April-June 2021.
An increase in oil exports and other foreign sales also contributed to the improved estimate of growth in the first quarter. The economy managed to expand at a decent pace despite a reduction in business inventories that shaved 2.1 percentage points off the quarter’s growth rate.
The Fed has raised its benchmark interest rate 10 times since March 2022 as part of its drive to bring down the inflation rate, which hit a four-decade high of 9.1% last year but has since fallen. slowed to 4%. Central bank rate hikes have pushed up the costs of mortgages, auto loans, credit cards and business loans, prompting widespread forecasts that an economic downturn is inevitable, but the economy has proven unexpectedly resilient.
