Source: Glonui.
Economic growth slowed in the first quarter.
On Thursday night, June 27th, the US Department of Commerce released final data showing that in the first quarter of this year, the actual annualized GDP rose 1.4% seasonally adjusted, a slight increase of 0.1 percentage points from the revised value of 1.3%, and a slight slowdown from 3.4% in the fourth quarter of last year, which is the slowest growth rate in nearly two years.
The Bureau of Economic Analysis of the United States stated that the data revision mainly reflects downward revision of imports and upward revision of non-residential fixed investment and government spending, which were partially offset by the downward adjustment of consumer spending.
Specifically, the retail trade, construction, finance and insurance industries contributed the most to the latest GDP data.
As for inflation, core PCE expenditure increased slightly, while PCE expenditure slowed significantly in the first quarter.
Consumer spending in the first quarter increased by only 1.5%, lower than the expected value and the previous value of 2%, indicating that high interest rates may be affecting the economy.
The final value of the seasonally adjusted annualized core PCE, excluding food and energy, rose 3.7%, a slight increase of 0.1 percentage points from the previous value of 3.6%, and a significant increase of 2% from the fourth quarter of last year.
After the data was released, the yield on 2-year Treasury bonds fell sharply.
After a series of strong economic data were released, US GDP growth slowed in the first quarter of this year.
The report showed that the slowdown in the US economy in the first quarter was mainly caused by two factors: a surge in imports and a decrease in commercial inventories.
Among them, imports caused a decrease of 0.82 percentage points in economic growth in the first quarter, and a decline in inventories caused a decrease of 0.42 percentage points in economic growth.
However, most economists believe that economic growth will rebound slightly in the second quarter.
Matthew Martin, a US economist at Oxford Economics Research Institute, predicts that driven by continued consumer spending, GDP annual growth rate in the second quarter will be about 2%; the prediction tool made by the Federal Reserve Bank of Atlanta predicts that the growth rate will be as high as 3%.
However, unless the Fed lowers interest rates to lower personal and corporate borrowing costs, economic growth is expected to not accelerate significantly.
As the world's largest economy, the US economy has shown remarkable resilience in the face of rising interest rates. The Fed has raised the benchmark interest rate 11 times in 2022 and 2023, reaching the highest level in 23 years, in an attempt to curb the most severe inflation in 40 years.
Although most economists predict that the sharp rise in consumer borrowing rates caused by the Fed's rate hike will cause the economy to enter a recession, this is not the case. The US economy continues to grow, albeit at a slower pace, and employers are still recruiting.
In May, the US added 272,000 new jobs, and although the unemployment rate rose slightly for the second consecutive month, it is still at a low level of 4%. At the same time, the overall inflation rate measured by government major price indices has fallen from a peak of 9.1% in 2022 to 3.3%, still higher than the Fed's target of 2%.
On Thursday night local time, President Joe Biden will debate Republican presidential candidate Donald Trump, and the economic situation will undoubtedly be the central topic of the debate.
Although from most indicators, the economy is still healthy, and the inflation rate is far below its peak, many Americans say that they are still frustrated by the overall high prices compared to before the pandemic.
Rising rent and grocery prices are the root cause of public dissatisfaction, and Trump is trying to blame Biden for it, in order to threaten Biden's re-election campaign.
Given that inflation remains high, earlier this month, the decision-makers of the Federal Reserve collectively predicted that they would only lower the benchmark interest rate once in 2024, which is lower than the previously predicted three times of rate cuts.
Even Fed Director Bowman claims that there are multiple upward risks of inflation, and it is expected that there will be no rate cut action in 2024.
However, currently, most economists still predict that the first rate cut will take place in September, and the second rate cut may take place in December.
Editor/Lambor