US GDP up 1.6% in first quarter, much lower than expected level

Prices rise at faster pace , says Commerce Department

BBN Desk

Prices spiral at a faster pace as the US economic growth is much weaker than expected in the January –March quarter, the Commerce Department revealed on Thursday.

According to the department’s Bureau of Economic Analysis, Gross Domestic Product or GDP during the three months clocked an increase of 1.6 per cent on annualized rate after adjusting for inflation.

Economists surveyed by Dow Jones had been looking for an increase of 2.4 per cent following a 3.4 per cent gain in the fourth quarter of 2023 and 4.9 per cent in the previous period.

Consumer spending increased 2.5 per cent in the period, down from a 3.3 per cent gain in the fourth quarter and below the 3 per cent Wall Street estimate. Fixed investment and government spending at the state and local levels helped keep GDP positive during the quarter, while a decline in private inventory investment and increased imports was subtracted. Net export subtracted 0.86 percentage points from the growth rate while consumer spending contributed 1.68 percentage points.

There was some bad news on the inflation front as well.

The personal consumption expenditure price index, a key inflation variable for the Federal Reserve, rose at a 3.4 per cent annualized pace for the quarter. Excluding food and energy, core PCE price grew at a 3.7 per cent rate, both well above the Fed’s 2 per cent target. Central bank officials tend to focus on core inflation as a stronger indicator of long-term trends.