WASHINGTON— The U.S. economy grew at a 2.0% annualized rate in the first quarter, rebounding from the prior quarter’s 0.5% pace but coming in slightly below economists’ expectations, as a sharp pickup in business investment helped offset weaker consumer spending and a drag from trade, according to the Bureau of Economic Analysis’ advance estimate released Thursday.
The BEA said first-quarter growth reflected increases in investment, consumer spending and exports, while imports increased—which subtracts from GDP in the national accounts. Consumer spending, which drives roughly two-thirds of U.S. activity, rose at a 1.6% annualized pace, up modestly from forecasts but still relatively soft, while the core PCE price index embedded in the GDP report accelerated to 4.3%, up sharply from 2.7% in the fourth quarter, underscoring persistent inflation pressure even as growth improved.
“First quarter GDP was in line with expectations, as a surge in business investment offset a sizable drag from trade. Consumption was relatively weak across the quarter, but most of that was concentrated in January when severe winter weather kept consumers home," said America's Credit Unions Chief Economist Curt Long. "The PCE index—the Federal Reserve’s preferred inflation measure—rose to its highest level in nearly three years. Economic growth is trending steadily upward as the AI boom is proving to be strong and durable enough to compensate for other areas of weakness, but inflation shows no signs of moderating. Credit unions remain focused on addressing their members’ affordability concerns by offering low-cost financial services.”
The numbers are likely to reinforce the balancing act now facing the Federal Reserve and financial institutions alike: growth remains positive and is recovering from a shutdown-hit fourth quarter, but inflation readings remain stubbornly elevated, analysts stated.