GDP grew at an annualized rate of 1.4% in the first quarter of this year. (iStock)
U.S. gross domestic product (GDP) grew at an annualized rate of 1.4% in the first quarter of 2024. Bureau of Economic Analysis data (BEA) found. The increase indicates that the economy is strong, but not growing at a significant pace.
This is a slight deceleration from the previous estimate of 1.6% GDP growth in the first quarter. Last year, GDP grew by 3.4% in the fourth quarter of 2023. Compared to last year, economic growth has slowed. The slowdown is mainly due to consumer caution.
“A range of retail, labor and consumer data points to the economy slowing as households tighten their purse strings a bit,” Jim Baird, chief information officer at Plante Moran Financial Advisors, said in a statement. “This is evident in the latest first-quarter GDP estimates and will likely become even clearer in the second-quarter data due in late July.”
Rising debt levels and high inflation have put pressure on consumers’ wallets, restricting their ability to shop freely in recent months.
“The sharp decline in outstanding credit card balances has been reversed by a surge in consumer credit balances in recent years, limiting the ability of many households to continue spending at the same pace as in recent years,” Baird said.
Compared to the fourth quarter, the slowdown in GDP reflects a decline in private consumption, as well as a slowdown in exports and government spending. This decline was offset by an acceleration in imports and residential fixed investment.
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80% of Americans are troubled by the rising cost of living
Interest rates stable, may be cut by end of year
The May inflation report showed inflation rose 3.3% over the past 12 months. The increase continues to raise consumer concerns, Central banks keep interest rates on hold It is 5.25% to 5.5%, and will remain at the same location rate from July 2023 onwards.
The Fed remains optimistic that inflation will stabilize at its desired 2 percent, but will not cut interest rates until there is more evidence that inflation is heading in that direction.
Economic activity is generally strong, employment is increasing, and the unemployment rate is just 4%. According to the Bureau of Labor StatisticsThis bodes well for possible future rate cuts, but inflation will need to ease first.
Interest rates are likely to remain high for the rest of the year, but if inflation falls, consumers could see interest rate cuts at the end of the year.
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Consumers want credit products despite high interest rates: TransUnion
Consumers remain concerned about inflation
Consumers are understandably worried about still-high inflation: Consumer sentiment fell in June, marking the third consecutive month that Americans have been dissatisfied with their economic situation because of inflation.
of University of Michigan Consumer Sentiment Index The index fell to 65.6 this month from 69.1 in May. The drop was below a typical reading that indicates the economy is doing well, at least in the eyes of the average consumer. In March, the index was 79.4, signaling rising optimism about the economy, but that increase has nearly been reversed as inflation remains high.
As inflation continues to drive up prices, food costs have become one of the biggest concerns for Americans. Purdue University Study We predict food prices will rise again next year.
“Food inflation has fallen significantly since then, to 2.6% this month, but inflation remains positive,” said Joseph Balagtas, a professor of agricultural economics at Purdue University. Said“Consumers, on average, expect food price inflation to rise slightly next year.”
Shoppers surveyed expect the average price of food and other grocery store items to increase 3.7% within the next year.
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Consumers discouraged by high interest rates and worsening financial conditions: Survey
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