U.S. Economic Growth Slows in First Quarter of 2024

Highlights:

• U.S. GDP growth slows to 1.6% in Q1 2024, down from 3.4% in the previous quarter.
• Consumer spending shifts, with increased services offsetting decreased goods purchases.
• Investments in housing and intellectual property remain robust, but federal government spending declines.

GDP Growth Eases

The U.S. economy experienced a slowdown in growth during the first quarter of 2024, with the gross domestic product (GDP) increasing at an annual rate of 1.6%, down from 3.4% in the previous quarter, according to the advance estimate by the Bureau of Economic Analysis.

Consumer Behavior Shifts

The deceleration in GDP largely reflects a shift in consumer spending, which saw a decrease in goods purchases, particularly motor vehicles and energy products, while spending on services like healthcare and financial services rose. This shift indicates a nuanced consumer response to current economic conditions.

Investments and Government Spending

Residential and nonresidential investments contributed positively, highlighted by robust activities in housing construction and intellectual property products. However, these gains were partly offset by reductions in inventory investments across wholesale trade and manufacturing sectors. Government spending also showed mixed results, with an increase in state and local government outlays contrasted

by a downturn in federal spending.

Imports and Exports

The quarter also saw an increase in imports, which detracts from GDP calculations, while exports appeared to slow down. This imbalance further influenced the overall GDP growth rate.

Inflation and Income Trends

Inflation pressures remained prevalent, with the price index for gross domestic purchases rising to 3.1%, and the personal consumption expenditures (PCE) price index up to 3.4%. Excluding food and energy, the core PCE index escalated to 3.7%, signaling sustained price increases across the economy.

Personal Income and Savings

On a brighter note, current-dollar personal income saw a significant rise, driven by increases in compensation and personal transfer receipts. However, the personal saving rate dipped to 3.6%, suggesting that individuals might be dipping into savings amid rising costs.

Looking Ahead

The preliminary GDP figures, while subject to revision, paint a picture of an economy grappling with internal shifts and external pressures. The next update, expected on May 30, will provide further insights, potentially revising the growth figures based on more complete data. As the economy heads into the second quarter, analysts and policymakers will closely watch these trends to gauge the potential for sustained economic adjustment or recovery.

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