Economic growth in the United States slowed more than anticipated in the first quarter of the year, but an increase in inflation suggests that the Federal Reserve will likely not cut interest rates before September. The Commerce Department’s Bureau of Economic Analysis reported that Gross Domestic Product (GDP) increased at a 1.6% annualized rate in the first quarter, with growth primarily supported by consumer spending.
Economists surveyed by Reuters had predicted a GDP growth rate of 2.4%, with a range of estimates from 1.0% to 3.1%. This was a decline from the 3.4% growth rate seen in the fourth quarter of the previous year. Despite the slowdown, the economy is still expanding above the non-inflationary growth rate of 1.8% that U.S. central bank officials consider sustainable.
The International Monetary Fund recently revised its forecast for U.S. growth in 2024 to 2.7%, up from the 2.1% projected earlier in the year. This is due to stronger-than-expected employment numbers and consumer spending. Job gains in the first quarter averaged 276,000 per month, an improvement from the previous quarter’s average of 212,000.
Since late 2022, the U.S. economy has continued to perform well despite fears following the Federal Reserve’s aggressive rate hikes to combat inflation. The country is outpacing other advanced economies, with consumers taking advantage of lower mortgage rates and businesses refinancing debt before interest rates rise further.