US economic growth slows and inflation rates rise in the first quarter Economy

The US economy grew in the first quarter at its slowest pace in nearly two years, with the trade deficit increasing due to a jump in imports to meet still strong consumer spending, but accelerating inflation reinforced expectations that the Federal Reserve (the US central bank) would not cut interest rates before next September. .

The slowdown in growth – which the Ministry of Commerce announced in a glimpse of the first quarter's gross domestic product on Thursday – also reflects the slowing pace of accumulation of inventories by companies and a decline in government spending, while domestic demand remains strong.

The Commerce Department's Bureau of Economic Analysis said that gross domestic product grew by 1.6% on an annual basis in the first quarter – supported largely by consumer spending – compared to 3.4%. During the fourth quarter of 2023.

Economists polled by Reuters expected the gross domestic product to rise by 2.4%, with estimates ranging from 1% to 3.1%.

Inflation increased, as the personal consumption expenditures price index – which excludes energy and food – rose 3.7% after rising by 2% in the fourth quarter.

The so-called Core Personal Consumption Expenditures Price Index is one of the inflation measures that the US Central Bank tracks to achieve its 2% target.

The central bank has kept the interest rate in the range of 5.25-5.50% since last July. It had raised the benchmark overnight interest rate by 525 basis points since March 2022.

Consumer spending grew at a still strong rate of 2.5%, slowing from the 3.3% growth recorded in the fourth quarter.

US President Joe Biden – who is seeking a second term – in the White House welcomed this “continued regular and stable growth,” and said in a statement, “But we still have work to do.”

He added, “The costs are too high for working families and I am fighting to reduce them,” accusing his Republican opponents of not having a “plan” for that.

The International Monetary Fund recently seemed more optimistic about US growth in 2024 than it was three months ago, and now expects growth of 2.7% compared to 2.1% last January, according to its updated economic forecasts that were published.