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- The third and final estimate of U.S. Gross Domestic Product (GDP) showed economic growth was a tick higher in Q1 than previously thought, but still considerably slower than the prior quarter.
- One thing dragging on GDP is slowed consumer spending, and this revision showed those levels are even lower than originally thought.
- Consumer spending has been the engine of the economy in the recovery from the pandemic and slower spending could indicate that the Federal Reserve’s fight against inflation is taking a toll.
The final word on the Gross Domestic Product (GDP) in the first quarter is out, and it confirms that U.S. economic growth slowed considerably in the first quarter, but not quite as dramatically as an earlier estimate showed.
The U.S. economy grew at an annual rate of 1.4% in the first quarter, down from 3.4% in the fourth quarter of 2023 the Bureau of Economic Analysis said Thursday.
It was the third and final estimate of GDP growth, revising figures that first came out in April. The second estimate, in May, had shown a 1.3% growth rate.
The latest reading on GDP, which measures the country’s entire economic output, incorporated new data showing that the U.S. imported fewer goods and services than previously thought. More imports take away from the country’s economic output.
GDP Revision Shows Slower Consumer Spending
The lessened impact of imports outweighed declines in the estimates for several other areas, including consumer spending, the main engine of the economy. The 1.4% rate was in line with the expectations of forecasters, according to a survey of economists by Dow Jones Newswires and the Wall Street Journal.
The GDP reading indicates the economy has slowed as the Federal Reserve’s high interest rates have discouraged borrowing and spending, as intended, to subdue high inflation. The economy is still growing, albeit at a slower pace, meaning that those high rates have yet to cause a recession. That could change if consumer spending continues to drop.
“The cycle that we’re in has been led by consumer spending and if that slows then it could be the beginning of a downturn in economic activity, which would have negative implications for corporate profits and the stock market,” Chris Zaccarelli, chief investment officer for Independent Advisor Alliance in Charlotte, North Carolina, wrote in a commentary.
However, economists expect GDP won’t signal an economic slump this year. According to the early estimates from the Federal Reserve Bank of Atlanta, GDP is expected to nearly double in the second quarter, rising to 3.0%.
“The monthly data are beginning to flag some slowdown though we think the economy will hold up well in the back half of the year,” wrote Nationwide’s Financial Markets Economist Oren Klachkin.