Economic growth slowed more than previously expected earlier this year as consumers cut back on spending amid rising prices and high interest rates.
Inflation-adjusted U.S. gross domestic product grew 1.3 percent annually in the first three months of the year, the Commerce Department said Thursday. That was down from 3.4 percent in the final quarter of 2023 and below the 1.6 percent growth rate reported last month in the government’s preliminary first quarter estimate.
The data released Thursday reflects more complete data than the first estimate released just a month after the quarter ended. The government will publish a further revision next month.
The preliminary data fell short of forecasters’ expectations, but economists at the time were largely unconcerned, arguing that the GDP total was distorted by sharp changes in business inventories and international trade, components that often fluctuate wildly from quarter to quarter . The underlying demand metrics were significantly stronger.
The revised data could be harder to discard. Consumer spending rose 2 percent annually – up from 3.3 percent in the fourth quarter and 2.5 percent in preliminary data for last quarter – and metrics of underlying demand were also revised downward. An alternative measure of economic growth based on revenue rather than spending cooled to 1.5 percent in the first quarter from 3.6 percent at the end of 2023.
Still, the new data does little to change the overall picture: The economy has slowed but remains fundamentally solid, supported by consumer spending, which remains robust even after recent revisions. This spending is supported by rising incomes and the result of a strong labor market with low unemployment and rising wages. There are still no signs that the recession that forecasters warned about last year is imminent.
Business investment, a sign of confidence in the economy, was actually revised slightly upward in the latest data. Income growth has also been revised upwards.
However, inflation remains stubborn. Consumer prices rose at an annual rate of 3.3 percent in the first three months of the year, slightly slower than in preliminary data but still well above the Federal Reserve’s long-term target of 2 percent.
In response, policymakers have raised interest rates to their highest level in decades and said they will keep them there until inflation cools further. The slightly slower growth reflected in Thursday’s data is unlikely to change this approach.
The Fed will get a more up-to-date overview of the economy on Friday when the government releases data on inflation, income and spending in April.
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2024-05-30 13:00:52
www.nytimes.com
