Slow GDP – US First Quarter GDP
There have been completely mixed signs regarding the economy for the past month or so, with something telling us that there is reason to worry and another saying that there is reason for hope. This theme has stayed constant even through yesterday, when the United States provided its GDP report for the first quarter of this year.
Last time we talked about the US GDP, it was for the fourth quarter of 2022 where the economy grew at a 2.6 percent rate annually, falling below economist expectations and creating doubts for this upcoming report. Indeed, the growth of the US economy slowed down even further as the GDP rose at a 1.1 percent annual rate, which was the worrying aspect of this report. Businesses were cutting back by a sizable amount in the quarter, with nonresidential equipment investment falling by 7.3 percent along with attempts to clear inventories due to sliding demand for certain products. Analysts are warning of a possible recession later in the year as the US economy is expected to continue slowing down and even shrink in the third quarter as the fallout of the regional banks and inflation continue to play a major role.
On the other hand, many point to the fact that a recession was expected this quarter itself, and it simply did not happen with GDP growth being higher than expected by economists. The strong labor market is providing consumers with money to spend, and it is showing little signs of slowing down, which was displayed in the GDP report. Consumption was the main driver of economic growth due to higher savings and incomes, allowing for more spending in the economy. The economy is still stronger than we think it is, and the next GDP report will give further clarity into that.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.