The US economy grew at its slowest pace in nearly two years in the first quarter amid some moderation in consumer spending and a wider trade deficit, but an acceleration in inflation reinforced expectations that the Federal Reserve would not cut interest rates before September.
The cooler-than-expected growth reported by the Commerce Department in its snapshot of first-quarter gross domestic product yesterday also reflected a slower pace of inventory accumulation by businesses and a downshift in government spending. Still, domestic demand remained solid, underpinned by business investment and a recovering housing market.
Gross domestic product increased at a 1.6 per cent annualised rate last quarter, the slowest pace since the second quarter of 2022, the Commerce Department’s Bureau of Economic Analysis said. Economists polled by Reuters had forecast GDP rising at a 2.4pc rate, with estimates ranging from a 1.0pc pace to a 3.1pc rate.
The economy grew at a 3.4pc rate in the fourth quarter. The first quarter growth’s pace was below what U.S. central bank officials regard as the non-inflationary growth rate of 1.8pc.