U.S. GDP expanded 1.1% in first quarter
The Hindu
U.S. economic growth slowed more than expected in the first quarter as an acceleration in consumer spending was offset by businesses cutting back on inventory investment in anticipation of weaker demand this year amid higher borrowing costs.
U.S. economic growth slowed more than expected in the first quarter as an acceleration in consumer spending was offset by businesses cutting back on inventory investment in anticipation of weaker demand this year amid higher borrowing costs.
Gross domestic product increased at a 1.1% annualised rate last quarter, the government said in its advance estimate of first-quarter GDP growth. The economy grew at a 2.6% pace in the fourth quarter. Economists polled by Reuters had forecast GDP rising at a 2.0% rate.
While the economy was not in recession last quarter, the outlook is darkening. Credit conditions have tightened following recent financial market turmoil, which together with the Federal Reserve's fastest rate hiking cycle since the 1980s have raised the risks of a downturn by the second half of the year.
"The outlook is uncertain," said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. "Our base case is that the lagged and cumulative effects of restrictive policy will keep the economy growing at a below potential pace over coming quarters."
Inventory investment declined at a $1.6 billion pace after increasing at a $136.5 billion rate in the fourth quarter. Inventories chopped off 2.26 percentage points from GDP growth.
Excluding inventories, government and trade, the economy grew at a 2.9% rate. This measure of domestic demand was flat in the fourth quarter.
The Federal Reserve is on track to raise interest rates by another 25 basis points next week, which is expected to be the last hike in the current cycle. The Fed has hiked its policy rate by 475 basis points since March of last year from the near-zero level to the current 4.75%-5.00% range.