US GDP Growth Slows in Q1 2024 Amid Mixed Economic Signals
- Moderate Growth: The US economy grew at a slower pace of 1.6% in the first quarter of 2024, down from 3.4% in the previous quarter, influenced by a significant increase in imports and subdued consumer spending on goods.
- Economic Outlook: Despite the slowdown, underlying economic indicators such as consumer spending and housing investment remain strong, with a cautiously optimistic forecast for the remainder of the year.
US First Quarter GDP Growth Falls Short of Expectations at 1.6%
The US economy has presented its first quarter GDP data for 2024, revealing a growth rate of 1.6% at an annualized pace, which is notably slower than the anticipated 2.5%. This marks the weakest pace of growth since the second quarter of 2022, when the economy actually contracted. The slowdown from the previous quarter's 3.4% growth rate is attributed to a sharp increase in imports, which negatively impacts GDP calculations, and a decrease in consumer spending on goods.
Despite the deceleration, consumer spending, which is a critical component of economic output, continued to contribute to growth, albeit at a reduced rate of 2.5% compared to 3.3% in the previous quarter. Housing investment also played a role in strengthening the economy. The resilience of consumer spending is further evidenced by Visa's earnings beating estimates, suggesting that spending remains robust.
US Economy: Mixed Signals Amid Slower GDP Growth and Positive Labor Market Trends
However, there are signs of economic stress, such as rising credit card debt levels and delinquencies, which are being closely monitored by the Federal Reserve. The Fed's restrictive interest rate policy has raised concerns about a potential slowdown, although Fed Chair Jerome Powell has indicated a willingness to let the current policy continue to work its way through the economy.
President Joe Biden has commented on the GDP report, emphasizing the ongoing strength and stability of the US economy, with significant growth since his tenure began and unemployment consistently below 4%. The labor market continues to surprise positively, with job additions far exceeding the number needed to keep up with labor force growth.
The GDP data also shows that the price index for gross domestic purchases increased by 3.1% in the first quarter, a rise from the previous quarter's 1.9. Personal income and disposable income both saw increases, although the personal saving rate dipped slightly.
Looking forward, the second estimate for the first quarter GDP is scheduled for release on May 30, 2024, which may provide a revised and more detailed economic picture. Deloitte maintains an optimistic baseline forecast, expecting the US economy to continue performing well in the short term, driven by the job market, consumer spending, and exports. Despite an anticipated slowdown in the coming quarters, the US economy is projected to grow by 2.4% this year and 1.4% in 2025.