Consumer spending revised down to 2% from 2.5% in Q1
Economic recovery following the pandemic expected to continue with 3.2% annualized growth in Q2 and 3.5% annualized growth in Q3
Federal Reserve's monetary policy implications rekindled due to slower economic growth and easing inflation
Slowdown in consumer spending attributed to price cuts by companies like Walmart and Target and potential financial stress for some consumers
US economy grew slower than initially estimated in Q1, expanding at an annualized rate of 1.3% instead of 1.6%
In a surprising turn of events, the US economy grew more slowly than initially estimated during the first quarter. According to revised data from the Bureau of Economic Analysis, Gross Domestic Product (GDP) expanded at an annualized rate of 1.3%, down from a previous estimate of 1.6%. This revision came as a result of a downward revision to consumer spending, which grew by only 2% in the first quarter compared to the initial reading of 2.5%. The slowdown in consumer spending was partly attributed to companies such as Walmart and Target cutting prices on staples like household supplies and groceries. Additionally, about 20% of consumers living paycheck to paycheck expect their savings to decrease this year, indicating potential financial stress.
The revision also had implications for the Federal Reserve's monetary policy. With inflation reading easing and economic growth slower than anticipated, expectations for at least one interest rate cut this year were rekindled. However, some analysts remain cautious about the impact of a potential rate cut on consumer spending and inflation.
The slowdown in GDP growth came as a disappointment to many economists who had expected a stronger economic recovery following the pandemic. Despite this setback, there are signs that the economy is continuing to expand, with some forecasters predicting 3.2% annualized growth in the second quarter and 3.5% annualized growth in the third quarter.
The revision to first-quarter GDP data also highlighted the importance of closely monitoring economic indicators and revising initial estimates as new information becomes available. This underscores the need for a diverse range of sources to ensure a complete understanding of economic developments.
US economy grew at an annualized pace of 1.3% during the first quarter, down from a first reading of 1.6% and in line with economist estimates
Consumer spending was revised down to 2% growth from a prior reading of 2.5%
GDP growth came in significantly lower than the fourth quarter’s revised rate of 3.4%
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. . . the economy grew more slowly than initially thought during the first quarter.
The slowdown in headline GDP comes at a time when markets have been sensitive to any readings indicating that the economy may be running too hot for the Federal Reserve’s liking, as inflation has proved stickier than expected.
Many forecasters don’t see the first quarter economic growth slowdown as the start of a broader trend.
