U.S. GDP slows to 1.1% in the first quarter

According to preliminary figures released by the Commerce Department on Thursday, the United States’ economic growth slowed down more than was anticipated in the first quarter.

The largest economy in the world saw real gross domestic product growth decelerate from 2.6% in the final three months of 2022 to 1.1% in January through March. Economic experts had anticipated that the reading would be 2.0%.

The decline from the fourth quarter was mainly caused by a decline in private inventories and nonresidential fixed investment. The Commerce Department highlighted in a statement that an increase in consumer expenditure partially offset these developments.

The statistics were released at a time when the Federal Reserve had aggressively raised interest rates over the previous year in an effort to tame soaring inflation.

Next week, the Fed is forecast to raise borrowing costs by another 25 basis points, which would bring the all-important federal funds target to a range of 5% to 5.25%. Officials may be mulling over a subsequent pause in the tightening cycle to give themselves time to examine the impact of last month’s turmoil in the financial services sector.

A sharp dip in shares of regional lender First Republic has stoked fresh worries that the banking tumult may only be in remission, and not yet completely finished. On Wednesday, First Republic, which reported $100 billion in customer withdrawals in March, saw its stock tumble by 29.75%, extending a series of steep declines throughout this week.