Economists had expected a slight downward revision in the second update, with the consensus forecast expecting GDP growth to be pruned to 1.2%. First-quarter GDP has fallen three-tenths of a percentage point since the preliminary report.
The latest update, the second of three, shows that first-quarter GDP growth was lower than the preceding quarter’s 3.4% clip.
The Bureau of Economic Analysis updates its GDP estimates over the course of several weeks as analysts get a better picture of how the economy performed during the first quarter.
The first quarter’s GDP reading is also a decline from all of 2023, which saw the economy expanded a healthy 2.5%.
The weaker growth in the first quarter was attributable in part to slower consumer spending. That could be a response to the Federal Reserve’s efforts to curb inflation by keeping interest rates higher for longer.
For months, economists have been expected GDP to slow down after the Fed raised its interest rate target to 5.25% to 5.50% in response to too-high inflation. Higher rates typically cause economic output to dampen.
But the previous few quarters of robust GDP numbers have given the Fed some ammunition to keep rates higher for longer, as has the underlying strength in the labor market.
The positive GDP growth has provided a talking point for President Joe Biden in his reelection bid.
The weaker growth in the first quarter was attributable in part to slower consumer spending. That could be a response to the Federal Reserve’s efforts to curb inflation by keeping interest rates higher for longer.
For months, economists have been expected GDP to slow down after the Fed raised its interest rate target to 5.25% to 5.50% in response to too-high inflation. Higher rates typically cause economic output to dampen.
But the previous few quarters of robust GDP numbers have given the Fed some ammunition to keep rates higher for longer, as has the underlying strength in the labor market.
The positive GDP growth has provided a talking point for President Joe Biden in his reelection bid.
Source: Zachary Halaschak, Washington Examiner
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