Yellow Light: US Economic Growth Slows in Q1 2024

The AS's economic growth in the first quarter of 2024 was more modest than expected, with declining data inflation.

Welcome to Ortechno! In this article, we will discuss the latest developments in the United States (US) economy for the first quarter of 2024. This news is important to follow, especially for economic actors and investors who want to understand current market dynamics.

Economic Growth Slows in Q1 2024

The US Bureau of Economic Analysis (BEA) recently reported that the growth rate of the gross domestic product (GDP) in Q1 2024 showed an increase of 1.3% compared to the previous quarter. However, this figure is lower than the initial forecast of 1.6%. This decline indicates a slowdown in the US economic growth rate.

Key Factors Affecting Economic Growth

Several key factors contributed to this slowdown, including:

1. Slower Consumer Spending

Consumer spending growth, the main engine of US economic growth, reached 2% in Q1 2024. This figure is lower than the previous estimate of 2.5%. The decline is mainly due to weaker spending on goods, particularly automobiles.

2. Federal Government Spending

Federal government spending also showed a slowdown, impacting overall economic growth.

3. Increased Imports

The rise in imports compared to initial forecasts also contributed to this slowdown.

4. Decreased Export Performance

Net export performance slowed for the first time in two years, further pressuring economic growth.

Economist Reactions and Analysis

Despite the weaker GDP growth, some economists still see positive signs in the economy. One key metric, final sales to private domestic purchasers, rose by 2.8%, although this is also lower than the initial report of 3.1%. This indicates that domestic demand remains strong.

National Financial Markets Economist Oren Klachkin stated in his note that monthly data after March generally shows continued economic expansion, albeit at a slower pace. He anticipates continued GDP growth this year and healthy progress in 2024 overall.

However, Klachkin also emphasized some warning signs regarding the economic outlook beneath the surface. Nevertheless, he believes there is no reason to be overly pessimistic about the future.

Effectiveness of Federal Reserve Strategies

The economic contraction in Q1 2024 also reflects the effectiveness of the Federal Reserve's (The Fed) strategy to cool down the economy through high interest rates. This strategy aims to reduce inflation by slowing down the economic growth rate.

However, with the economy slowing down, corporate profits also fell by 0.6% to $3.39 trillion from a record high in Q4 2023. This is the first decline in the past year.

US Economic Outlook

According to Comerica Bank's chief economist, Bill Adams, the downward revision of economic growth and the smaller downward revision of inflation make it likely that The Fed will start lowering interest rates in September. With the economy operating at a slower pace and capacity margins loosening, consumers are feeling less satisfied.

This is illustrated by data from the National Association of Realtors showing that pending contracts for home purchases in the US dropped the most in three years in April 2024. Overall activity levels are also the lowest since the onset of the Covid-19 pandemic in the spring of 2020.

Conclusion

The slowdown in US economic growth in Q1 2024 indicates that the global economy still faces various challenges. Despite some warning signs, economists remain optimistic that the US economy will continue to grow, albeit at a slower pace.

At Ortechno, we will continue to monitor these developments and provide you with the latest information. Feel free to visit our site for the latest economic news and in-depth analysis. Stay updated and prepare the best strategies to face global economic changes.

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