The U.S. economy grew at just 1.6% annually and inflation soared in the first three months of this year, the government reported Thursday.
Economists had expected gross domestic product (GDP) to grow at 2.5%. In the fourth quarter of 2023, the economy grew at an annual rate of 3.4%.
Consumer spending was strong but weaker than many economists expected, with consumers spending significantly less on goods. Spending on durable goods fell at an annual rate of 1.2%. Spending on services increased by 4%. Overall spending growth was 2.5%, lower than the 3% expected and the 3.3% recorded in the last three months of 2023.
Inflation accelerated despite a slowdown in consumer spending. The personal consumption expenditure price index rose at a pace of 3.4% in the first quarter, almost double the 1.8% rise in the previous three months.
Exports slumped, reflecting weak demand amid economic hardship around the world, while imports soared. Imports are subtracted from gross domestic product.
Fundamental domestic economic demand remained strong, and the impact of the weak headline growth rate was somewhat cushioned. Final sales to domestic individual buyers rose 3.1%, slightly lower than the 3.3% recorded at the end of last year and faster than the 3% pace recorded in the third quarter of last year.
Business capital investment increased at an annual rate of 2.9%. Investment in business structure decreased, but capital investment and intellectual property investment increased. Housing investment grew at a very fast pace of 13.9% per year.
