The US economy is cooling off and the first estimate of the Gross Domestic Product (GDP) for the first quarter showed growth well below expectations, a tangible sign of the effects of the rate increase by the Federal Reserve (Fed) initiated a few years ago. a year to fight inflation.
During the first three months of 2023, GDP growth stood at 1.1% in an annualized projection.
This initial estimate published yesterday by the Department of Commerce shows a much lower figure for a year than the 2.6% projected in the previous quarter, and also much lower than what was expected by analysts, who saw a growth of 2% in the quarter, according to the Briefing.com consensus.
In relation to the previous quarter, the economy expanded 0.3%, half the growth observed in the last quarter of last year in the quarter-on-quarter measurement.
“GDP growth reflects an increase in consumer spending, public spending and exports, which offset the fall in private and real estate investment,” the Commerce Department detailed in its report.
On the other hand, the trade deficit widened in the first two months of the year due to an increase in imports, particularly raw materials and pharmaceutical products. Data for March will be released at the end of next week.
Although household consumption held steady during the first three months of the year, it moderated over the months and fell 1% in March, while consumer confidence also declined.
Although inflation has subsided to the point of reaching an annual figure of 5% in March, its lowest level in almost two years, it remains too high and weighs on the purchasing power of Americans.
The Federal Reserve will have its monetary policy meeting on Monday and Tuesday to decide on its interest rate. The market expects another rise of 25 basis points.
Generalized inflation risk
Households must also deal with rising borrowing costs, which have grown steadily over the year.
These rates are now between 4.75 and 5%, the highest since 2007, and everything seems to indicate that they will continue to rise until inflation returns to 2%, the target set by the US central bank.
Our data leads us to believe that monetary tightening and recent tensions in the banking system will lead to a mild recession, albeit stronger than we have previously anticipated,” Ryan Sweet, chief economist at Oxford Economics, told AFP. .
Most analysts foresee a difficult end to the year for the United States, with weak growth accompanied by recession in the coming quarters, particularly due to the tightening of financial conditions.
