The U.S. economy posted a slight improvement from the second estimate in the first quarter of 2024, according to the latest from the Bureau of Economic Analysis. Real gross domestic product (GDP) increased at an annual rate of 1.4%, up from the second estimate of 1.3% but is still down from the 3.4% rate observed in the fourth quarter of 2023 and marks the worst quarter since Q2 of 2022.
The modest increase in GDP primarily reflects gains in several key sectors. Consumer spending, residential fixed investment, nonresidential fixed investment, and state and local government spending all contributed positively to the GDP. These gains were partially offset by a decrease in private inventory investment.
Key Drivers of Growth
- Consumer Spending: Strong consumer spending played a significant role, indicating continued confidence among consumers despite economic headwinds.
- Residential Fixed Investment: Investments in residential properties saw a boost, contributing positively to the overall economic activity.
- Nonresidential Fixed Investment: Business investments in equipment and infrastructure also showed an uptick, indicating a cautious optimism in the business community.
- State and Local Government Spending: Increased expenditure by state and local governments further supported the GDP growth.
Sector-Specific Performance
Within the private services-producing industries, several sectors stood out:
- Retail Trade: Led by motor vehicle and parts dealers, retail trade saw significant contributions to GDP growth.
- Finance and Insurance: Activities related to Federal Reserve banks, credit intermediation, and related financial services provided a robust boost.
- Health Care and Social Assistance: Ambulatory health care services were major contributors within this sector.
However, the private goods-producing industries experienced mixed results:
- Durable Goods Manufacturing: This sector saw a decline, with primary metals leading the decrease.
- Nondurable Goods Manufacturing: Petroleum and coal products were significant drags on the sector.
- Construction: An increase in construction activities partly offset the declines in manufacturing.
Personal Income and Saving
Personal income rose by $396.8 billion in the first quarter, a downward revision of $7.7 billion from previous estimates. Personal saving was also revised downward, standing at $777.3 billion, $19.3 billion less than earlier estimates. These revisions suggest a more cautious outlook among consumers and could imply tighter financial conditions moving forward.
Economic Outlook
The data paints a complex picture of the U.S. economy. While there is growth, the pace has slowed considerably from the previous quarter, reflecting ongoing challenges. The positive contributions from consumer spending and government expenditures highlight areas of resilience, but the declines in key manufacturing sectors underscore persistent vulnerabilities.
Economists will be watching closely to see if the second quarter of 2024 brings a rebound or if the trend of slowing growth continues. The interplay between consumer confidence, business investment, and government spending will be critical in shaping the economic landscape in the coming months.
