U.S. economic growth slowed more than expected in the first quarter, but an acceleration in inflation suggested that the Federal Reserve would not cut interest rates before September.
Gross domestic product increased at a 1.6 per cent annualized rate last quarter, the Commerce Department’s Bureau of Economic Analysis said in its advance estimate of first-quarter GDP on Thursday. Growth was largely supported by consumer spending. Economists polled by Reuters had forecast GDP rising at a 2.4 per cent rate, with estimates ranging from a 1.0 per cent pace to a 3.1 per cent rate. The economy grew at a 3.4 per cent rate in the fourth quarter. It is expanding at a pace above what U.S. central bank officials regard as the non-inflationary growth rate of 1.8 per cent.
The International Monetary Fund last week upgraded its forecast for 2024 U.S. growth to 2.7 per cent from the 2.1 per cent projected in January, citing stronger-than-expected employment and consumer spending. Job gains in the first quarter averaged 276,000 per month versus the October-December quarter’s average of 212,000.
The economy has defied prophecies of doom since late 2022 following the Fed’s aggressive rate hiking campaign to stamp out inflation. The United States is outperforming other advanced economies. Consumers locked in lower mortgage rates, while businesses refinanced debt before the tightening cycle began, economists say.
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