The U.S. Department of Commerce released a report on Thursday (May 30) stating that the economic growth rate in the first quarter of the United States fell below previous expectations following a downward revision to consumer spending.
From January to March, the annualized growth rate of the Gross Domestic Product (GDP), the broadest measure of economic activity, was 1.3%, lower than the previously estimated 1.6% and significantly below the 3.4% growth rate in the last three months of 2023.
Prior to the downward revision of the growth rate in the first quarter, recent readings on retail sales and equipment spending also showed weakness.
The inflation rate for the first quarter was revised down from 3.4% to 3.3%, marking the strongest quarterly increase in price pressures in a year. After experiencing loosening for most of last year, inflation indicators in 2024 started higher than expected, prompting Federal Reserve policymakers to delay expectations of interest rate cuts.
Following a slight decrease in inflation in the first quarter, U.S. Treasury yields declined, and stock index futures narrowed their losses before the opening on Wall Street.
The downward revision of the GDP brought the first-quarter growth rate to its lowest level since the economic contraction in the second quarter of 2022, pushing output below the 1.8% level that Federal Reserve officials consider the longer-term non-inflationary potential.
However, due to the ongoing strength in the job market, it is expected that the soft start to this year will not continue into the current second quarter.
The U.S. Department of Labor also stated on Thursday that the number of Americans filing new claims for unemployment benefits slightly increased last week, but there are still signs of continued strength in the labor market that should support the economy.
In the week ending on May 25, the number of initial claims for state unemployment benefits increased by 3,000 people, reaching 219,000 after seasonal adjustments. Economists surveyed by Reuters had previously predicted 218,000 people.
Unemployment benefit claims reports showed that in the week ending on May 18, the number of continuing claims for those who had filed for unemployment benefits after the first week increased by 4,000 people, reaching 1.791 million after seasonal adjustments.
Since March 2022, the Federal Reserve has raised interest rates by 525 basis points, leading to a slowing overall economic demand, with the labor market steadily rebalancing.
(This article was based on a report from Reuters)