Economy expanded at slower-than-expected rate
The US economy’s growth was milder than expected in the first quarter of the year, with new government figures showing gross domestic product (GDP) came in lower than analysts had anticipated.
The Bureau of Economic Analysis released an advance estimate that indicated growth at a 1.6% annualized pace in the first three months of the year, compared with expectations of 2.5% among economists surveyed by Bloomberg.
Fourth-quarter GDP was revised upwards to 3.9%, meaning growth slowed notably between the end of 2023 and beginning of this year in a possible further indication that high interest rates are beginning to weigh down on the economy.
Those rates have spiked since 2022 amid efforts by the Federal Reserve to tackle surging inflation – but while the central bank was widely expected to introduce rate cuts in the second half of this year, those hopes have receded somewhat amid surprisingly high recent consumer price index (CPI) readings.
The core CPI, which excludes food and energy costs, increased by 3.8% in March on a year-over-year basis, while the overall inflation rate jumped by 3.5%, a sharper rise than expected.
The Bureau of Economic Analysis indicated in remarks accompanying its latest GDP report that consumer spending, exports, and state and local government spending had all ticked lower in the first quarter of the year.
Federal government spending was also down, while residential fixed investment increased and imports accelerated.
Mortgage Bankers Association vice president and deputy chief economist Joel Kan noted that the new figures marked the weakest quarterly GDP growth rate since the middle of 2022, and said the Fed still appeared on course for cuts at some point before 2025.
“Surprisingly strong” and persistent inflation, he said, “will leave the Fed in no hurry to cut rates. As indicated in our April forecast, we expect potentially two rate cuts in the latter part of this year.”
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
