On April 25, 2024, the United States reported economic figures that Gross Domestic Product (GDP) in the first quarter of 2024 grew by 1.6% compared to the same quarter of the previous year (YOY).
The growth rate of 1.6% was below economists’ expectations for GDP growth of 2.4% and the lowest quarterly growth rate in two years.
Meanwhile, “personal spending” which is the main engine driving economic growth grew by just 2.5% (YOY), slowing down quite sharply from growth of 3.3% in the previous quarter. and below the 3% growth expectation, while exports slowed by 0.9% (YOY), imports increased by 7.2%.
If we consider only domestic demand the US economy grew by 2.8% (YOY) in that quarter, which was still slower than the previous quarter’s rate of 3.5%.
Economic growth is slowing. It represents a loss of momentum for the US economy. Meanwhile, inflation has continued to fall near the target rate of 2% and has increased slightly in the last two months (February and March). The first time in a year This makes it less likely that the US economy will be able to soft land or reduce inflation to its target without the economy contracting.
With rising inflation the meeting is expected to be held next week. The Federal Reserve’s Monetary Policy Committee will maintain its policy interest rate at 5.25-5.50%, the highest level in 23 years, and may face renewed pressure to delay further rate cuts. and they may even have to consider whether or not to raise interest rates further.
Olu Sonola (Olu Sonola), head of US economic research at Fitch Ratings, analyzed that with the hot inflation numbers in the economic report released this year. If economic growth continues to slow down slowly but inflation accelerates in the wrong direction, The possibility of a cut in the fed rate in 2024 becomes increasingly far-reaching.
Eliza Winger Economist (Bloomberg Economics) Eliza Winger said the US economy continues to expand at a rate above trend. With the exception of volatile categories, strong imports are also indicative of continued strong demand. That’s not what the Fed wants.
“This is a report of the worst of both worlds – growth is slower than expected. and higher-than-expected inflation,” said David Donabedian, chief investment officer of CIBC Private Wealth US. It will not meet investors’ expectations.
Jeffrey Roach LPL Chief Financial Economist Jeffrey Roach said the economy is likely to slow further in the coming quarters as consumers tend to end spending
“Savings rates are falling. This is because stubborn inflation puts more pressure on consumers. We should expect inflation to ease throughout this year. This is because overall demand has slowed. However, the path to the Fed’s 2% target remains remote. ”
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