Ford F-150 trucks are assembled at Ford’s Dearborn Truck Plant. (Carlos Osorio/AP)
[Stay on top of transportation news: Get TTNews in your inbox.]
WASHINGTON — The American economy expanded at a 1.4% annual pace from January through March, the slowest quarterly growth since spring 2022, the government said June 27 in a slight upgrade from its previous estimate. Consumer spending grew just 1.5%, down from an initial estimate of 2% in a sign that high interest rates may be taking a toll on the economy.
The Commerce Department had previously estimated that the gross domestic product — the economy’s total output of goods and services — advanced at a 1.3% rate last quarter.
The first quarter’s GDP growth marked a sharp pullback from a strong 3.4% pace during the final three months of 2023. Still, the report showed that the January-March slowdown was caused mainly by two factors — a surge in imports and a drop in business inventories — that can bounce around from quarter to quarter and don’t necessarily reflect the underlying health of the economy.
Imports shaved 0.82 percentage point off first-quarter growth. Lower inventories subtracted 0.42 percentage point.
Revision for U.S. GDP brought growth up to +1.4% (q/q ann.) in 1Q2024; prior read was +1.3% pic.twitter.com/h46fwcJAm1
— Liz Ann Sonders (@LizAnnSonders) June 27, 2024
Most economists think growth has picked up in the current quarter. Matthew Martin, U.S. economist at Oxford Economics, has estimated an annual growth rate of around 2% for April through June, fueled by continued spending by America’s consumers. A forecasting tool produced by the Federal Reserve Bank of Atlanta predicts a much stronger growth rate — 3%.
The U.S. economy, the world’s biggest, has proved surprisingly resilient in the face of higher interest rates. The Federal Reserve raised its benchmark rate 11 times in 2022 and 2023, to a 23-year high, to try to tame the worst bout of inflation in four decades. Most economists predicted that the much higher consumer borrowing rates that resulted from the Fed’s hikes would send the economy into a recession.
It didn’t happen. The economy has kept growing, though at a slower rate, and employers have kept hiring. In May, the nation added a strong 272,000 jobs, although the unemployment rate edged up for a second straight month, to a still-low 4%. At the same time, overall inflation, as measured by the government’s main price gauge, has tumbled from a peak of 9.1% in 2022 to 3.3%, still above the Fed’s 2% target level.
The June 27 report was the third and final government estimate of first-quarter GDP growth. The Commerce Department will issue its first estimate of the current quarter’s economic performance on July 25.