USA: It is clear that the economy is losing momentum at the beginning of the year

April 25, 2024, 3:40 p.m

WASHINGTON – US economic growth slowed significantly at the beginning of the year. In the first quarter, gross domestic product rose by an annual rate of 1.6 percent compared to the previous quarter, the Commerce Department announced Thursday in Washington. In the fourth quarter, the world's largest economy grew at a double rate of 3.4 percent. Analysts had expected an average rate of 2.5 percent at the beginning of the year.

Compared to the fourth quarter, the development in the first quarter was less favorable in many areas. Consumers spent less, exporters did not do well, and government spending declined. On the other hand, construction spending increased and supported overall growth. However, companies produced smaller amounts of inventories.

The underlying growth rate remains positive
Analysts at Capital Economics also cited falling corporate inventories as a drag. In addition, imports increased, which also imposed accounting pressure on economic performance. Apart from that, the underlying growth rate remains positive.

Economist Dirk Schleinsch from Landesbank Baden-Württemberg also sees no reason for economic pessimism. Private domestic demand rose at the beginning of the year at a rate similar to what it was in the last quarter. “The strength of the US economy is surprising again.”

How does the Fed interpret the numbers?
It is questionable how the US central bank, the Federal Reserve, will interpret these numbers. He is not currently making any major moves to bid farewell to his tight monetary policy. In addition to strong economic development, they point to persistent inflation as an obstacle. Financial markets have not fully factored in two interest rate cuts this year, after there were nearly six at the start of the year.

US growth figures are estimated on an annual basis, that is, they are extrapolated over the course of the year. It indicates how much the economy will grow if the pace continues for a year. This method is not used in Europe, which is why the numbers cannot be compared directly. To get a similar growth rate to Europe, you would have to divide the US rate by four. (awp/mc/page)