AFP :
US economic growth lost steam in the first quarter as gloomier business investment countered a rise in consumer spending, the Commerce Department said Thursday, while the possibility of a mild recession brews.
Consumption has provided a boost to the world’s biggest economy, giving it a strong start to 2023, but recent banking sector turmoil and higher interest rates weigh on the outlook.
US gross domestic product rose at an annual rate of 1.1 percent in the January to March period, markedly less than expected and down from 2.6 percent in the final three months last year.
“Compared to the fourth quarter, the deceleration in real GDP in the first quarter primarily reflected a downturn in private inventory investment and a slowdown in nonresidential fixed investment,” the Commerce Department said.
It added that this was partly offset by an acceleration in consumer spending and an upturn in exports. The GDP growth figure “reflected increases in consumer spending, exports, federal government spending,” along with some forms of investment, said the department in a statement.
Economic activity has been easing as the US central bank rapidly hiked its benchmark lending rate to tackle stubborn inflation, while the full fallout from recent financial sector unrest — following the failures of three midsized lenders last month — is yet to be seen. Next month, Federal Reserve policymakers are expected to unveil another quarter-point rate increase in their quest to bring inflation back in line with a lower target.
“Looking ahead, the outlook is uncertain,” said Rubeela Farooqi, chief US economist at High Frequency Economics.
“Policymakers have taken aggressive action to slow down economic activity and lower inflation back towards target,” she added. Retail sales bounced in January, likely helped by mild weather, but Ian Shepherdson and Kieran Clancy of Pantheon Macroeconomics cautioned in a recent note that “it would be dangerous” to extrapolate from apparent strength in the first three months.
US growth cools in first quarter as recession fears deepen
