1st Quarter US GDP Data Shows Economic Growth is Slowing

The first quarter US GDP data is in, and it's not looking great. The economy grew at an annual rate of 1.4%, which is the slowest pace since 2016. This slowdown is a sign that the US economy is losing steam.

The GDP growth rate is a key indicator of the economy's overall health, and a rate of 1.4% is significantly lower than the 2.1% growth rate in the previous quarter. It's also lower than the 2.3% growth rate economists had expected.

The slowdown in GDP growth is likely due to a combination of factors, including a decline in business investment and a slowdown in consumer spending. Business investment, which accounts for a significant portion of GDP, fell by 2.7% in the first quarter. Consumer spending, which accounts for about 70% of GDP, also slowed down, growing at a rate of 1.1%.

The US Economic Research suggests that the economy is slowing down, but not yet in recession. Economic growth slowed more sharply early this year than initially estimated, with the Commerce Department reporting a 1.3 percent annual rate in the first three months of the year.

Consumer spending, the main engine of the US economy, decelerated in the first quarter, slowing to a 2.5% annual growth rate from 3.3% in the fourth quarter. This slowdown was driven by a decrease in spending on material goods.

The job market remains strong, with low unemployment and rising wages supporting consumer spending. However, credit card debt levels and delinquencies have been rising, which the Fed is paying close attention to.

The economy is showing cracks, and it's not just a matter of a slowdown. Economic growth slowed more sharply early this year than initially estimated, with consumers easing up on spending amid rising prices and high interest rates.

The Commerce Department reported that U.S. gross domestic product, adjusted for inflation, grew at a 1.3 percent annual rate in the first three months of the year. This is down from 3.4 percent in the final quarter of 2023 and below the 1.6 percent growth rate reported last month.

Consumer spending, the main engine of the U.S. economy, decelerated in the first quarter, slowing to a 2.5% annual growth rate from 3.3% in the fourth quarter. This slowdown was driven by a decrease in spending on material goods.

Business investment, a sign of confidence in the economy, was actually revised up modestly in the latest data. However, inflation remains stubborn, with consumer prices rising at a 3.3 percent annual rate in the first three months of the year.

Credit card debt levels and delinquencies have been rising, which are gauges the Fed is paying close attention to. Chicago Fed President Austan Goolsbee noted that consumer debt levels aren’t yet “especially” high, but that an increase can sometimes be a harbinger for weakness on the horizon.

The Center for Quantitative Economic Research at the Atlanta Fed is a hub for innovative economic forecasting. They provide a "nowcast" of the official GDP estimate prior to its release, using a methodology similar to the one used by the U.S. Bureau of Economic Analysis.

Their GDPNow forecasting model estimates real GDP growth in the current quarter based on available economic data. It's not an official forecast, but rather a running estimate that's updated regularly.

The GDPNow model is based solely on mathematical results, without any subjective adjustments. This means it doesn't capture the impact of external events like COVID-19, unless they've already been reflected in the underlying economic data.

You can view recent forecasts for the GDPNow model online, along with extensive numerical details and underlying source data. The latest estimate for real GDP growth in the fourth quarter of 2024 is 2.7 percent, as of January 9, 2025.

The next update for GDPNow is scheduled for Thursday, January 16.