The economy expanded at a 1.3% seasonally adjusted annual rate in the first quarter of this year, a downward revision of three-tenths of a percentage point.
Economists had expected the revision to show GDP growth pruned to 1.2%.
The latest update, the second of three, shows that first-quarter GDP growth was lower than the preceding quarter’s 3.4% clip.
The Bureau of Economic Analysis updates its GDP estimates over the course of several weeks as analysts get a better picture of how the economy performed during the first quarter.
The first quarter’s GDP reading is also a decline from all of 2023, when the economy expanded a healthy 2.5%.
“The U.S. economy should continue to expand throughout 2024, but at a slower pace than last year as high interest rates remain a drag,” PNC chief economist Gus Faucher said. “Consumer fundamentals are good thanks to strong job gains and wages that are increasing more quickly than inflation. Real GDP growth will be below 2% in 2024, close to the economy’s long-run potential.”
The weaker growth in the first quarter was attributable in part to slower consumer spending. That could be a response to the Federal Reserve’s efforts to curb inflation by keeping interest rates higher for longer.
For months, economists have expected GDP to slow down after the Fed raised its interest rate target to 5.25% to 5.50% in response to too-high inflation. Higher rates typically cause economic output to dampen.
But the previous few quarters of robust GDP numbers have given the Fed some ammunition to keep rates higher for longer, as has the underlying strength in the labor market.
The positive GDP growth has provided a talking point for President Joe Biden in his reelection bid.
Still, public perceptions of his management of economic affairs are harshly negative.
A recent Harris poll for the Guardian found that 56% of people believe the United States is experiencing a recession. The National Bureau of Economic Research, a private academic group, defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”
In addition to overall economic output remaining positive, the jobs market has also held up, and unemployment is low.
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The economy added 175,000 jobs in April, and the unemployment rate remained below 4%.
Official GDP data from the second quarter of this year will be released in July, but the Federal Reserve Bank of Atlanta’s “GDP Now” tracker predicts that GDP growth in the second quarter will clock in at 3.5%, according to the latest estimate.
