U.S. Economy Slows in Q1 2024

Payam Javan: The U.S. economy experienced a slowdown in the first quarter of 2024, with the Bureau of Economic Analysis reporting real GDP growth at 1.3%, down from the initial estimate of 1.6%. This is a significant drop from the 3.4% growth seen in the fourth quarter of 2023, marking the lowest growth rate since early 2022.

Inflation showed signs of easing, with the PCE price index decreasing to 3.3% and core PCE to 3.6%. Consumer spending was revised down to 2%, affected by a 1.9% decline in goods spending, while services consumption increased by 3.9%. Government spending contributed 18% to GDP, with net exports and private investment rising by 1.2% and 3.2%, respectively.

Financial markets remained stable following the new GDP data, with benchmark indexes declining by up to 0.8% and U.S. Treasury yields falling. The U.S. Dollar Index stayed below 105.00.

Looking ahead, economic forecasts for the second quarter vary. The Federal Reserve Bank of Atlanta predicts 3.5% growth, while the New York Fed estimates around 2%. The Fed’s Beige Book reflects cautious optimism, although small business surveys highlight concerns about inflation and interest rates.

Consumer confidence improved slightly in May, but recession fears persist, with many small business owners worried about stagflation. The upcoming PCE price index report is expected to show a rate of 2.7%. Labor market data revealed an increase in jobless claims and a rise in wholesale inventories.

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