US economic growth in last quarter revised to still tepid 1.3% annual rate
The U.S. economy grew at a lackluster 1.3% annual rate from January to March as businesses fearing an economic slowdown cut inventories, the government said on Thursday in a slight upward revision from its initial estimate. .
The government had previously estimated that the economy grew at an annual rate of 1.1% last quarter.
The Commerce Department’s revised measure of growth in the nation’s gross domestic product — the economy’s total output of goods and services — marked a deceleration from July-September’s 3.2% annual growth and 2.6% from October to December.
Despite the slowdown in the first quarter, consumer spending, which accounts for about 70% of U.S. economic output, grew at an annual rate of 3.8%, the highest in nearly two years and an encouraging sign of confidence. Household. Specifically, spending on physical goods, such as appliances and cars, rose 6.3%, also the fastest growth rate since April-June last year.
A reduction in business inventories reduced growth by 2.1 percentage points from January to March.
The steady slowdown in economic growth is a consequence of the Federal Reserve’s aggressive drive to control inflation, with 10 interest rate hikes in the past 14 months. Across the economy, the Fed’s rate hike increased the costs of auto loans, credit card borrowing and business loans.
With mortgage rates doubling over the past year, the housing market has already taken a beating: investment in housing fell at an annual rate of 0.2% from January to March. In April, sales of existing homes were 23% below their level a year earlier.
While Fed rate hikes have gradually slowed growth, inflation has come down from a four-decade high last year. Yet consumer prices were still up 4.9% in April from a year earlier, well above the Fed’s 2% target.
The slowing economy is widely expected to lead to a recession later this year. For now, however, most sectors of the economy other than housing are showing surprising resilience. Retail sales continued to increase. The same goes for orders for manufactured goods.
More importantly, the country’s labor market remains fundamentally strong. In April, employers added 253,000 jobs and the unemployment rate hit its lowest level in 54 years. The rate of layoffs remains relatively low. And job openings, though down, are still well above pre-pandemic levels.