The U.S. economy experienced a sluggish growth rate of 1.3% from January through March, marking the weakest quarterly performance since the spring of 2022. This figure represents a downgrade from the previous estimate provided by the Commerce Department, which had initially projected a 1.6% expansion in GDP for the same period.
The slowdown in GDP growth was primarily attributed to a surge in imports and a reduction in business inventories, both of which tend to fluctuate from quarter to quarter. Imports subtracted more than 1 percentage point from last quarter's growth, while a decrease in business inventories accounted for nearly half a percentage point.
Consumer spending, a key driver of economic growth, increased at a 2% annual rate, lower than the initial estimate of 2.5%. Notably, spending on goods such as appliances and furniture saw a significant decline, while services spending rose at a healthy 3.9% rate, the highest since mid-2021.
Inflationary pressures persisted in the first quarter, with consumer prices rising at a 3.3% annual pace, the highest in a year. Core inflation, excluding food and energy costs, also saw an uptick, reaching a 3.6% clip.
Despite the challenges posed by high interest rates and inflation, the U.S. economy has displayed resilience in the face of these headwinds. Business investment, particularly in housing, software, and research and development, contributed positively to first-quarter growth.
Looking ahead, uncertainties loom as the Federal Reserve delays anticipated rate cuts due to persistent inflation levels above the target of 2%. The economy's trajectory in the coming quarters may be impacted by these factors, potentially affecting consumption and overall growth.
The Commerce Department is set to release its first estimate of the current quarter's economic performance on July 25. Forecasts suggest a potential acceleration in economic growth to a 3.5% annual rate from April through June, indicating a possible rebound from the sluggish pace observed in the first quarter.
