GDP Grew Only 1.6% in the First Quarter in the First Sign of Slowing Growth as Businesses

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In what could be the first significant sign the U.S. economy may be slowing from the weight of higher interest rates, gross domestic product grew at an annual rate of 1.6% in the first quarter.

That is well below the 2.2% consensus forecast and comes after a string of hotter-than-expected GDP reports dating back to last fall.

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“The increase in the first quarter primarily reflected increases in consumer spending and housing investment that were partly offset by a decrease in inventory investment,” the report from the Bureau of Economic Analysis said. “Imports, which are a subtraction in the calculation of GDP, increased.”

“Compared to the fourth quarter, the deceleration in real GDP in the first quarter primarily reflected decelerations in consumer spending, exports, and state and local government spending and a downturn in federal government spending,” the BEA said. “These movements were partly offset by an acceleration in residential fixed investment. Imports accelerated.”
The economy grew by 3.4% in the fourth quarter of 2023.

Although the report means that consumers are continuing to spend, the deceleration in economic activity, if it continues, could mean the Federal Reserve will be able to cut interest rates sooner as it tries to bring inflation down to its 2% target. That would make borrowing costs on everything from car loans to credit cards and home mortgages easier for consumers to handle.

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