The Bureau of Economic Analysis (BEA) reported on Thursday that the US economy expanded by 1.1% in the first quarter of this year, falling short of economists' expectations for a 2% growth rate. The slower-than-anticipated growth comes despite several major headwinds and follows a robust fourth-quarter expansion at an annualized rate of 2.6%.
John Smith, senior economist at ABC Financial Group stated: "The preliminary report is weaker than forecasted, but it's important to note that household spending and business investment had slowed down towards the end of last year." He added that most experts anticipate GDP growth to decrease as economic conditions darken throughout the remainder of the year.
In response to these developments, the Federal Reserve increased its interest rate target—an action intended to curb economic activity.
According to data from the Commerce Department, gross domestic product (GDP) rose at a lower-than-expected annualized pace during Q1 due primarily to decelerating consumer spending and exports coupled with smaller investments in housing than originally predicted.
Despite this slowdown, private businesses and consumers still saw their total expenditures increase by an impressive 3.2%, marking their fastest growth since Q2 2021.
Dr. Jane Doe, chief economist at XYZ Research Institute explained: "While overall GDP growth was disappointing compared to expectations for Q1, we should not overlook that consumer spending remained strong—rising by nearly 4%. This suggests there remains some resilience within our economy."
However, Dr. Doe also highlighted concerns over potential strains within the US banking sector which could lead to credit tightening up twice as much as previously estimated by Federal Reserve Chair Jerome Powell.
As inflation continues causing concern among policymakers and analysts alike—with personal consumption expenditures price index increasing by a higher-than-projected figure of 4.2%—the US economy's future trajectory remains uncertain.
For now, the nation has seen a 2.1% economic growth for 2022; however, experts will be watching closely to see how these factors play out in subsequent quarters and impact GDP expansion moving forward.