U.S. economic growth in the first quarter was slower than expected.
The U.S. Bureau of Economic Analysis' preliminary estimates of U.S. gross domestic product (GDP) for the first quarter showed the economy grew at an annual rate of 1.6%. During that period. Economists surveyed by Bloomberg estimated that the U.S. economy grew at an annual rate of 2.5% during this period.
This figure was significantly lower than fourth-quarter GDP, which was revised upward to 3.9%.
The softer-than-expected reading shows that the Federal Reserve's historic interest rate hikes are putting pressure on consumers and the economy. Investors are closely watching economic data for clues about when the central bank will start cutting interest rates.
Consumer spending growth in the quarter fell to 2.5% from 3.3% in the previous quarter. Economists had expected a 3% increase.
“Compared to the fourth quarter, the slowdown in real GDP in the first quarter primarily reflected slowdowns in consumer spending, exports, state and local government spending, and weaker federal spending,” BEA said in a statement. said. “These movements were partially offset by an acceleration in housing investment. Imports accelerated.”
Slower-than-expected economic growth was accompanied by surprisingly high inflation rates. The “core” personal consumption expenditure index, which excludes volatile food and energy categories, rose 3.7% in the first quarter, beating expectations for a 3.4% increase and well above the previous quarter's 2% increase.
Ahead of Thursday's GDP release, the overall healthy outlook for the U.S. economy through the first quarter has left economists and others wondering why the central bank can keep interest rates high while waiting for inflation to fall further. This has been an important point of contention within the Fed itself.
Federal Reserve Chairman Jerome Powell said on April 16, “Given the strength of the labor market and the historical development of inflation, we are willing to allow more time for restrictive policies to take effect.'' “It's best to let the data and future outlook guide us.”
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
For the latest stock market news and in-depth analysis of price-moving events, click here.
Read the latest financial and business news from Yahoo Finance
