WASHINGTON–The U.S. economy slowed during the first quarter of this year, performing below levels many analysts had forecast.
Overall gross domestic product (GDP) expanded at a 1.6% seasonally- and inflation-adjusted annual rate in the first quarter, according to the Commerce Department.
Consumers continue to spend, but not everywhere. Spending remains robust on healthcare and insurance (which have seen sharp appreciation in some areas) and other services, the Commerce Department said.
But consumers have cut back on spending on goods such as cars and gasoline. Exports and businesses’ inventory investments also contributed to the slowdown.
Even with the reduced performance, inflation remains above the Fed’s target rate and also exceeded what many had predicted.
Excluding volatile food and energy prices, the personal-consumption-expenditures price index rose 3.7% in the first quarter at an annualized rate, Commerce reported. Economists had generally had expectations of a 3.4% increase.
‘Key Components Strong’
“"GDP fell shy of expectations in the first quarter, registering the slowest pace of growth in nearly two years. However, key components like consumption and business fixed investment remained strong, while volatile elements such as inventory growth and net exports accounted for the undershoot,” said America’s Credit Unions Deputy Chief Economist Curt Long. “This suggests that the economy remains on stable footing, and that the Federal Reserve can afford to wait for inflation to slow before cutting interest rates. Credit unions are a net positive for the economy, generating over $200 billion in economic activity annually."
Inflation Figures to be Released Today
The Commerce Department will release inflation figures for March on Friday.
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