The U.S. economy continued to grow early this year, but at a sharply slower rate as strong consumer spending was offset by higher prices and pockets of weakness in other sectors.
Gross domestic product, adjusted for inflation, increased at a 1.6 percent annual rate in the first three months of 2024, down from 3.4 percent at the end of 2023, the Commerce Department said Thursday.
Taken on its own, the downshift in growth is not necessarily worrisome, particularly given that the Federal Reserve has been trying to cool off the economy. And the weaker first quarter numbers were driven in part by big shifts in business inventories and international trade, which often swing wildly from one quarter to the next. Measures of underlying growth were stronger.
“It would suggest some moderation in growth but still a solid economy,” said Michael Gapen, chief U.S. economist for Bank of America. He said the report contained “few signs of weakness overall.”
Still, the growth rate was below what economists had expected, and the slowdown has come at the same time that the Fed’s fight against inflation has stalled: Prices rose more quickly in the first quarter than at the end of last year, and Thursday’s data showed a more rapid acceleration than forecasters had anticipated. That raises the uncomfortable possibility that high interest rates are taking a toll on economic activity but not succeeding in fully taming inflation.
“It increases the chances of a harder landing,” said Constance L. Hunter, an economist at MacroPolicy Perspectives, a forecasting firm.
