The US economy grew more slowly than initially estimated in the first quarter of the year, according to the Bureau of Economic Analysis’s updated report. The revised figures show that the gross domestic product (GDP) increased at an annual rate of 1.3% during this period, a decrease from the previously reported growth rate of 1.6%. This adjustment aligns with the expectations of economists.
The US economy grew at a slower pace in the first quarter than initially reported as gross domestic product rose 1.3% annualized in the first three months of the year, below the previous estimate of 1.6%.
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This revision was mainly due to a lower estimate of consumer spending. Personal consumption expenditures, which reflect the amount spent by individuals on goods and services, grew at a rate of 2% in the first quarter, down from the earlier estimate of 2.5%.
The revised growth rate for the first quarter stands in contrast to the growth seen in the previous quarter, where GDP growth was notably higher at 3.4%. This disparity highlights a slowdown in economic momentum at the start of the year.
Revised numbers show Biden's economy is slowing down more than expected:https://t.co/vgqNmltwy4
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Despite the slowdown, some analysts remain optimistic about the underlying strength of the economy. “The weaker headline growth statistic looks discouraging, but it belies solid underlying momentum as the economy’s core — private domestic sales to domestic purchasers — showed a healthy expansion of 2.5% annualized,” noted Oren Klachkin, a financial markets economist.
The slower growth comes at a critical time when market participants are particularly sensitive to economic indicators that might suggest the economy is overheating, which could complicate the Federal Reserve’s efforts to manage inflation. Persistent inflation has been more challenging to control than anticipated, fueling worries that continued strong growth could exacerbate price rises.
US economy grew by just 1.6% in the first quarter, a much slower pace than expectedhttps://t.co/UHT4STu9v7
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Despite these concerns, many experts do not believe the slower growth in the first quarter signals the beginning of a downturn. For instance, projections prior to the release of these revised figures were optimistic about the near future, with expectations for a rebound in the second quarter. Goldman Sachs had anticipated a 3.2% growth rate, and the Atlanta Fed’s GDPNow model was forecasting a 3.5% increase.
Further supporting a positive outlook, Klachkin pointed out that data from the months following March indicate that the economy continues to expand, albeit at a moderated pace. “Monthly data beyond March generally point to a continued, albeit gently cooling, economic expansion,” he explained. Looking ahead, he anticipates sustained growth throughout the year and a robust economic performance in 2024.
Major Points
- The U.S. GDP grew at a revised rate of 1.3% in the first quarter, down from the initial estimate of 1.6%.
- This slowdown was primarily due to a reduction in consumer spending, which increased by only 2%.
- Despite the slowdown, the economic fundamentals remain strong, with private domestic sales to domestic purchasers growing by 2.5%.
- The revised figures come amid concerns that persistent inflation could complicate the Federal Reserve’s monetary policy.
- Economic forecasts remain optimistic, with predictions of continued growth into 2024 and a rebound expected in the second quarter.
Fallon Jacobson – Reprinted with permission of Whatfinger News
