US economic growth slows more than expected in Q1

The US economy is expected to have maintained solid growth in the first quarter of the year, albeit at a slightly slower pace, while inflation likely picked up speed. This reinforces market expectations that the Federal Reserve will postpone interest rate cuts until September.

The Commerce Department’s report on first-quarter gross domestic product (GDP) on Thursday is anticipated to show that consumer spending continued to drive economic activity, supported by a resilient job market. Despite concerns, the economy has remained robust since late 2022, defying predictions of a downturn following the Fed’s aggressive rate hikes to tackle inflation.

Compared to other advanced economies, the United States has been a standout performer. Consumers have benefited from lower mortgage rates, while businesses have taken advantage of debt refinancing opportunities ahead of the tightening monetary policy. Companies, buoyed by strong pricing power, have retained workers, a departure from previous economic cycles where layoffs were swift at the first signs of a slowdown.

Analysts project that GDP likely expanded at a 2.4% annualized rate in the first quarter, with estimates ranging from 1.0% to 3.1%. This is a moderation from the 3.4% growth recorded in the fourth quarter but still above the Fed’s non-inflationary growth rate of 1.8%.

The International Monetary Fund (IMF) recently upgraded its forecast for US growth in 2024 to 2.7%, citing better-than-expected employment and consumer spending. This underscores the resilience and strength of the US economy despite global economic challenges.