US GDP slows to +1.6% in 1st quarter, lowest level in 2 years; inflation accelerates | Reuters

WASHINGTON (Reuters) – The U.S. Department of Commerce announced on the 25th that preliminary figures for gross domestic product (GDP) for the first quarter of 2024 were an annualized 1.6% increase from the previous quarter. Growth slowed significantly from the previous quarter’s 3.4% growth, and was almost the lowest level in two.

Growth was supported by continued strong personal consumption. At the same time, it led to a sharp increase in imports and widened the trade deficit, which put a damper on growth. It also showed that inflation was accelerating, increasing expectations that the US Federal Reserve would not cut interest rates before September.

Growth fell short of market expectations of 2.4% growth and also below the 1.8% rate the Fed considers to be non-inflationary.

A slowdown in the pace of corporate inventory additions and a decline in government spending also put pressure on growth.

“It sends contradictory messages,” said Olu Sonora, Fitch’s head of economic research. “If growth continues to moderately slow and inflation spikes again in the wrong direction, the Fed will cut rates by the end of the year. “That possibility is becoming more and more remote.”

The core personal consumption expenditures (PCE) index, which excludes food and energy and is closely watched by the Federal Reserve as a measure of prices, rose 3.7%, accelerating from a 2.0% rise in the previous quarter.

Personal consumption, which accounts for more than two-thirds of U.S. economic activity, increased by 2.5%. However, the growth slowed from the 3.3% increase in the previous quarter.

The slowdown in growth in corporate inventories pushed down the growth rate by 0.35 percentage points, and the trade deficit by 0.86 percentage points.

Excluding inventories, government spending and trade, the growth rate was 3.1%. In the previous quarter, it was 3.3%.

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