U.S. economic growth revised up to 1.3% annual rate for first quarter

The U.S. economic system grew at a lackluster 1.3% annual fee from January by means of March as companies cautious of an financial slowdown trimmed their inventories, the federal government mentioned Thursday in a slight improve from its preliminary estimate.

The federal government had beforehand estimated that the economic system grew at a 1.1% annual fee final quarter.

The Commerce Division’s revised measure of development within the nation’s gross home product — the economic system’s complete output of products and providers — marked a deceleration from 3.2% annual development from July by means of September and a couple of.6% from October by means of December.

Regardless of the first-quarter slowdown, client spending, which accounts for round 70% of America’s financial output, rose at a 3.8% annual tempo, probably the most in practically two years and an encouraging signal of family confidence. Particularly, spending on bodily items, like home equipment and automobiles, rose 6.3%, additionally the quickest development fee since April-June of final yr.

A cutback in enterprise inventories shaved 2.1 share factors off January-March development.

The regular slowdown in financial development is a consequence of the Federal Reserve’s aggressive drive to tame inflation, with 10 rate of interest hikes over the previous 14 months. Throughout the economic system, the Fed’s fee enhance have elevated the prices of auto loans, bank card borrowing and enterprise loans.

With mortgage charges having doubled over the previous yr, the actual property market has already taken a beating: Funding in housing fell at a 0.2% annual fee from January by means of March. In April, gross sales of current houses had been 23% under their stage a yr earlier.

Because the Fed’s fee hikes have steadily slowed development, inflation has eased from the four-decade excessive it reached final yr. Nonetheless, client costs had been nonetheless up 4.9% in April from a yr earlier — nicely above the Fed’s 2% goal.

The economic system’s slowdown is broadly anticipated to result in a recession later this yr.

Along with greater borrowing charges, the economic system’s different obstacles embody a cutback in lending as banks preserve money after three large financial institution failures in latest months.

There may be additionally the looming threat that Home Republicans will refuse to boost the statutory restrict on what the federal government can borrow, if President Joe Biden and the Democrats don’t comply with sharp spending cuts. That would depart the Treasury unable for the primary time to pay all its payments on time. Economists say a protracted debt default would trigger downgrades of the U.S. credit score and sure set off a recession deeper and prior to the one that’s already anticipated.

For now, although, most sectors of the economic system apart from housing are displaying stunning resilience. Retail gross sales have continued to rise. So have orders for manufactured items.

Most importantly, the nation’s job market stays basically stable. In April, employers added 253,000 jobs, and the unemployment fee matched a 54-year low. The tempo of layoffs stays comparatively low. And job openings, although declining, are nonetheless nicely above pre-pandemic ranges.

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