Economy Grows Slower Than Expected in Q1
The U.S. economy expanded at a slower pace than initially thought in the first quarter of 2024, with GDP growing at an annualized rate of 1.3%, revised down from a preliminary estimate of 1.6%, according to data released by the Bureau of Economic Analysis. The growth rate marks a significant deceleration from the 3.4% pace seen in the final quarter of 2023.
Why It Matters: This slower growth rate could signal underlying weaknesses in the economy, potentially influencing the Federal Reserve’s monetary policy decisions in the coming months.
By The Numbers: The GDP increase was mainly driven by consumer spending, which rose 2.0% and contributed 1.34 percentage points to the overall GDP growth. Other positive contributors included:
- Residential fixed investment, adding 0.57 percentage points.
- Nonresidential fixed investment, contributing 0.44 percentage points.
- State and local government spending, which added 0.28 percentage points.
However, these gains were partially offset by declines in:
- Private inventory investment, which subtracted 0.45 percentage points.
- Consumption of goods, also reducing the growth rate by 0.45 percentage points.
Context: This marks the weakest quarter since the second quarter of 2022, when the GDP contracted for two consecutive quarters. The latest figures align with economists’ expectations but raise concerns about the sustainability of recovery amidst varying economic challenges.
Bottom Line: The slowdown comes ahead of May’s jobs report next week which will give us a good indication if April’s disappointing jobs report was an anomaly or if we are truly seeing a cooling in the labor market.
