WASHINGTON — The American economy expanded at a 1.4% annual pace from January through March, the slowest quarterly growth since spring 2022, the government said Thursday in a slight upgrade from its previous estimate. Consumer spending grew at just a 1.5% rate, down from an initial estimate of 2%, in a sign that high interest rates may be taking a toll on the economy.
The Commerce Department had previously estimated that the gross domestic product — the economy’s total output of goods and services — advanced at a 1.3% rate last quarter.
The first quarter’s GDP growth marked a sharp pullback from a strong 3.4% pace during the final three months of 2023. Still, Thursday’s report showed that the January-March slowdown was caused mainly by two factors — a surge in imports and a drop in business inventories — that can bounce around from quarter to quarter and don’t necessarily reflect the underlying health of the economy.
Imports shaved 0.82 percentage point off first-quarter growth. Lower inventories subtracted 0.42 percentage point.
Picking up the slack was business investment, which the government said rose at a 4.4% annual pace last quarter, up from its previous estimate of 3.2%. Higher investment in factories and other nonresidential buildings and in software and other types of intellectual property helped boost the increase.
After growing at a solid annual pace of more than 3% in the second half of 2023, consumer spending decelerated sharply last quarter. Spending on appliances, furniture and other goods fell by a 2.3% annual rate, while spending on travel, restaurant meals and other services rose at a 3.3% rate.
Chris Zaccarelli, chief investment officer for the Independent Advisor Alliance, called the downshift in consumer spending “a cause for concern.’’ Consumers account for around 70% of U.S. economic activity.
“The economy remained resilient in the first quarter,” said Gregory Daco, chief economist at the tax and consulting firm EY. But ”private-sector demand growth was cooling, led by more consumer prudence. Importantly though, the economy is not retrenching, with business investment retaining moderate momentum.”
Many economists have been expecting growth to strengthen in the current April-June quarter. But an Oxford Economics forecasting model — based on economic statistics that have been reported so far — points instead to a tepid 1.3% growth rate this quarter.
The U.S. economy, the world’s biggest, has proved surprisingly resilient in the face of higher interest rates. The Federal Reserve raised its benchmark rate 11 times in 2022 and 2023, to a 23-year high, to try to tame the worst bout of inflation in four decades. Most economists predicted that the much higher consumer borrowing rates that resulted from the Fed’s hikes would send the economy into a recession.
It didn’t happen. The economy has kept growing, though at a slower rate, and employers have kept hiring. In May, the nation added a strong 272,000 jobs, although the unemployment rate edged up for a second straight month, to a still-low 4%. At the same time, overall inflation, as measured by the government’s main price gauge, has tumbled from a peak of 9.1% in 2022 to 3.3%, still above the Fed’s 2% target level.
The state of the economy is sure to be a central topic Thursday night when President Joe Biden will debate Donald Trump, the presumptive Republican presidential nominee. Though the economy remains healthy by most measures and inflation is way down from its peak, many Americans say they’re frustrated that overall prices are still well above their pre-pandemic levels. Costlier rents and groceries are particular sources of discontent, and Trump has sought to pin the blame on Biden in a threat to the president’s re-election bid.
A measure of inflation in the January-March GDP report showed that price pressures accelerated at the start of 2024. Consumer prices rose at a 3.4% annual pace, up from 1.8% in the fourth quarter of 2023. Excluding volatile food and energy costs, so-called core inflation rose at a 3.7% annual clip, up from 2% in each of the previous two quarters.
In light of the still-elevated inflation pressures, the Fed’s policymakers earlier this month collectively predicted that they would cut their benchmark rate just once in 2024, down from their previous forecast of three rate cuts. Most economists expect the first rate cut to come in September, with possibly a second cut to come in December.
Thursday’s report was the third and final government estimate of first-quarter GDP growth. The Commerce Department will issue its first estimate of the current quarter’s economic performance on July 25.
FAQs
The US economy expanded at a 1.4% annual pace from January to March, the slowest quarterly growth since spring 2022, according to the government. Consumer spending grew only 1.5%, indicating high interest rates may be impacting the economy. The Commerce Department estimated a 1.3% GDP growth in the first quarter.
What is the economic growth rate in the last quarter? ›
Basic Info. US Real GDP QoQ is at 3.00%, compared to 1.40% last quarter and 2.10% last year. This is lower than the long term average of 3.18%. US Real GDP Growth is measured as the year over year change in the Gross Domestic Product in the US as adjusted for inflation.
What is economic growth rate the annual percentage change of? ›
Economic growth rate measures the percentage change in a country's economy (often in GDP) over a specific period.
At what rate is the US economy growing? ›
Real gross domestic product (GDP) increased at an annual rate of 3.0 percent in the second quarter of 2024, according to the "second" estimate. In the first quarter, real GDP increased 1.4 percent.
What is the US annual economic growth rate by year? ›
U.S. gdp growth rate for 2022 was 1.94%, a 4.01% decline from 2021. U.S. gdp growth rate for 2021 was 5.95%, a 8.71% increase from 2020. U.S. gdp growth rate for 2020 was -2.77%, a 5.06% decline from 2019. U.S. gdp growth rate for 2019 was 2.29%, a 0.65% decline from 2018.
Is the US GDP rising or falling? ›
Between the final quarter of 2022 and the second quarter of 2024, the cumulative increase in real GDP was 4.3 percent, well above the 1.2 percent increase predicted by the CBO and the 0.7 percent increase predicted by the Blue Chip Consensus Forecast.
What is the latest quarterly growth rate of GDP? ›
India Gross Domestic Product (GDP) Quarterly YoY
| Release Date | Actual | Forecast |
|---|
| May 31, 2024 (Q4) | 7.8% | 6.7% |
| Feb 29, 2024 (Q3) | 8.4% | 6.6% |
| Nov 30, 2023 (Q2) | 7.6% | 6.8% |
| Aug 31, 2023 (Q1) | 7.8% | 7.7% |
2 more rowsEconomic Growth Rates in the World
As mentioned earlier, a developed economy such as the United States or Canada should expect a GDP growth rate of around 2%-3% on average. There are fewer opportunities for profitable projects, and the economy can only expand a marginal amount.
What is the average annual rate of economic growth? ›
GDP Annual Growth Rate in the United States averaged 3.15 percent from 1948 until 2024, reaching an all time high of 13.40 percent in the fourth quarter of 1950 and a record low of -7.50 percent in the second quarter of 2020. source: U.S. Bureau of Economic Analysis.
What is the actual annual growth rate? ›
Understanding the Average Annual Growth Rate (AAGR)
It is calculated by adding the individual growth rates together and then dividing the resulting figure by the total number of time periods. AAGR is easy to calculate, smooths out fluctuations, and facilitates comparison across different datasets and timeframes.
Real gross domestic product (GDP) increased at an annual rate of 3.0 percent in the second quarter of 2024, according to the "second" estimate. In the first quarter, real GDP increased 1.4 percent.
How is the US economy doing right now? ›
Is the U.S. economy growing? The U.S. economy has shown steady growth since it dropped to unprecedented levels during the second quarter of 2020 due to the pandemic — and then rebounded almost as quickly. A year later, in the second quarter of 2021, the rate of annual growth hit a high not seen since the 1950s.
What is the inflation rate in the last quarter? ›
US PCE Inflation Rate is at 2.50%, compared to 3.40% last quarter and 2.50% last year. This is lower than the long term average of 3.14%. The US PCE Inflation Rate is the percentage in which a chosen basket of goods and services purchased in the US increases in price over a year.
What is the US GDP growth per quarter? ›
US GDP Growth Revised Higher
Real gross domestic product (GDP) in the US grew at an annualized rate of 3.0% in the second quarter of 2024, up from 2.8% in the initial estimate and 1.4% in the first quarter. The upward revision was mainly due to increased consumer spending (2.9% vs 2.3% earlier reported).
When did the US have the highest economic growth? ›
The most vigorous, sustained periods of growth, on the other hand, took place from early 1961 to mid-1969, with an expansion of 53% (5.1% a year), from mid-1991 to late 2000, at 43% (3.8% a year), and from late 1982 to mid-1990, at 37% (4% a year).
What is the US GDP right now? ›
US GDP is at a current level of 28.65T, up from 28.27T last quarter and up from 27.06T one year ago. This is a change of 1.36% from last quarter and 5.87% from one year ago.
How much did the US economy grow in Q1 2024? ›
Real GDP growth rose by an unexpected 2.8 percent quarterly annualized in Q2 2024 (from 1.4 percent in Q1 2024), led by stronger domestic demand and a surge in inventories.
What is the economic growth rate? ›
US GDP Growth Revised Higher
Real gross domestic product (GDP) in the US grew at an annualized rate of 3.0% in the second quarter of 2024, up from 2.8% in the initial estimate and 1.4% in the first quarter. The upward revision was mainly due to increased consumer spending (2.9% vs 2.3% earlier reported).
Is GDP up this year? ›
US GDP (I:USGDP)
US GDP is at a current level of 28.65T, up from 28.27T last quarter and up from 27.06T one year ago. This is a change of 1.36% from last quarter and 5.87% from one year ago. US GDP or Gross Domestic Product is the total value of goods produced and services provided in the US.
What is driving US economic growth? ›
U.S. economy shows strong 2.8 percent growth, driven by consumers and businesses. WASHINGTON (AP) — The nation's economy accelerated last quarter at a strong 2.8 percent annual pace, with consumers and businesses helping drive growth despite the pressure of continually high interest rates.
