(Washington) United States GDP growth disappointed in the first quarter of 2024, slowing more than expected and even reaching its lowest level in almost two years, after a year 2023 which had surpassed all expectations.
U.S. gross domestic product (GDP) growth slowed to an annualized 1.6% in the three months from January to March, compared with 3.4% in 4e quarter 2023, according to the Commerce Department’s first estimate, published Thursday.
These data are adjusted for inflation, that is, the calculation excludes the effects of rising prices.
Growth of 2.2% was expected by analysts, according to the Market Watch consensus.
The 1.6% figure could have been good news in the eyes of investors, who believe that if the American economy shows signs of weakness, the Central Bank (Fed) will be more inclined to lower its key interest rates.
But at the same time, core inflation, which excludes changes in energy and food, was stronger than expected.
President Joe Biden, who is seeking a second term in the White House, welcomed this “continuation of regular and stable growth” in a press release.
“But we still have work to do. The costs are too high for working families and I am fighting to reduce them,” he promised, accusing his Republican opponents of having “no plan” for this.
The United States publishes its growth at an annualized rate, which compares GDP to that of the previous quarter and then projects developments over the entire year at this rate.
But simply comparing it to the previous quarter, as other advanced economies do, the growth is 0.4%.
“Uncertain outlook”
This slowdown “mainly reflects a deceleration in consumer spending, exports”, and public spending, details the Commerce Department in its press release.
However, consumption remains the engine of growth in the world’s largest economy, representing more than two thirds of GDP. But it is particularly on health care, financial services and insurance that American households spent more.
“The slow increase in GDP in the first quarter will likely set the tone for the remainder of 2024,” according to Ian Shepherdson, chief economist for Pantheon Macroeconomics.
“The future outlook is uncertain. The strength of the labor market should keep household spending and growth positive for the moment,” anticipates Rubeela Farooqi, chief economist for High Frequency Economics, in a note.
But, she warns, the cards are now in the hands of the American central bank (Fed), while developments in economic growth, inflation, and employment are linked to each other. .
The Fed wanted to slow down economic activity in the hope of seeing inflation return to an acceptable level, and therefore raised its rates to their highest level in 20 years, increasing the cost of credit.
Now she wants to start lowering them again. But a rebound in inflation at the start of 2024 could postpone this moment by several months, to avoid seeing prices soar again.
It must nevertheless be careful not to start too late, warns Rubeela Farooqi, because this, then, “could constitute an obstacle to consumption and the growth trajectory in the coming quarters”.
IMF more optimistic
The next Fed meeting will take place Tuesday April 30 and Wednesday April 1er may.
The monetary policy institution had, during its last meeting in mid-March, significantly raised its GDP growth projection for 2024 at the last meeting, in mid-March, to 2.1% instead of 1.4% previously.
The IMF has also recently been more optimistic for US growth in 2024, expecting 2.7% growth in its economic forecasts published last week, compared to only 2.1% in January.
Because American growth surprised in 2023, showing itself to be much more vigorous than expected, and handily thwarting recession forecasts. It had even accelerated, to 2.5%, compared to 1.9% in 2022.
Consumption, in fact, remained solid, despite purchasing power being eroded on the one hand by inflation and on the other by rising interest rates.
In 2020 and 2021, US GDP yo-yoed, breaking records in one direction then the other.
It first recorded its biggest decline since 1946 (-3.5%) due to COVID-19, with even two months of recession, then the strongest growth since 1984 (+5.9%).
reference: www.lapresse.ca