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Statistics released Thursday showed the U.S. economy grew less than expected.
Experts had expected the economic growth rate to be 2.2%, but the growth rate was only 1.6%.
The U.S. economy cooled more than expected in the first quarter of this year, but remained healthy by historical standards. Economic growth has slowed steadily over the past 12 months, which bodes well for lower interest rates, but the Federal Reserve has made clear it is in no hurry to cut rates.
Gross domestic product (GDP), which measures all services and goods produced in the economy, grew at an annual rate of 1.6% in the first quarter, the Commerce Department said Thursday. This was the slowest growth pace since the second quarter of 2022, when the economy contracted.
That was a sharp slowdown from 3.4% in the fourth quarter and 2.2% below economists’ expectations, according to a FactSet poll. This figure is adjusted to account for seasonal fluctuations and inflation.
A surge in imports, which are deducted from GDP, contributed to the slowdown in growth from the fourth quarter, shaving almost the entire percentage point. Import spending rose to 7.2% from 2.2% in the fourth quarter. A decline in private sector inventory investment also weighed on the economy earlier this year.
The Dow Jones fell on the news.
Stock futures fell sharply on Thursday after the latest U.S. economic data showed a sharp slowdown in growth and pointed to persistent inflation.
According to the U.S. Bureau of Economic Analysis, U.S. gross domestic product (GDP) expanded by 1.6% in the first quarter. According to a survey of economists conducted by Dow Jones, GDP growth is expected to be 2.4%.
In addition to slower growth rates in the quarter, the report showed that consumer prices rose at a pace of 3.4%, significantly faster than the 1.8% rise in the previous quarter. That raised concerns about persistent inflation and called into question whether the Fed could cut interest rates anytime soon.
“In the short term, these numbers don’t seem to be a green light for either the bulls or the bears, but if the initial reaction in stock index futures is any indication, in a market undergoing the most severe pullback, Uncertainty is unlikely to ease the pressure it has seen since last year,” said Chris Larkin, managing director of trading and investing at Morgan Stanley’s E*Trade.
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