Growth Stalls as U.S. Economy Expands by 1.6% in Last Quarter

The U.S. economy saw a slowdown in growth at the beginning of 2022, marking its slowest pace since the second quarter of 2022. Despite this slowdown, there are still few signs of a recession, which is a positive indicator for the overall economic health.

Real gross domestic product (GDP) increased by 1.6% during the first three months of the year compared to the fourth quarter of 2023 on an annualized basis. This growth rate was lower than the consensus economist estimates of about 2.5%, showing a significant deceleration in economic activity.

While the growth rate is lower than in previous quarters, it remains positive, which is a notable achievement considering the monetary policy adjustments made by the Federal Reserve to control inflation. The U.S. economy had entered a technical recession two years ago, with GDP declining for two consecutive quarters.

Investors reacted negatively to the lower-than-expected GDP growth, with S&P 500 futures down more than 0.7%. Earnings performance also contributed to the decline in equity prices.

The nominal GDP of the U.S. in the first quarter was $28.3 trillion, making it the largest economy globally, surpassing China and Germany by a considerable margin.

Real GDP growth, which accounts for inflation and currency exchange differences, is crucial for measuring the true output of the economy. The steady growth in the face of tighter monetary policy is surprising, as higher interest rates typically lead to economic downturns. Despite challenges, the U.S. economy continues to show resilience and positive growth trends.