GDP: The U.S. Economy Grew 1.6% Annually in the First Quarter, Falling Short of Estimates

The US economy grew slower than expected in the first quarter.

The Bureau of Economic Analysis’s first-quarter estimate of U.S. gross domestic product (GDP) showed the economy grew 1.6% on an annual basis. during the phase, slower than consensus forecasts. Economists surveyed by Bloomberg estimated that the U.S. economy grew 2.5% on an annual basis during the period.

The figure was well below fourth quarter GDP, which was revised upwards to 3.9%.

The GDP release comes amid ongoing concerns about a slowdown due to the Federal Reserve’s tight interest rate policy. The weaker-than-expected pressure is a sign that the Federal Reserve’s historic rate hikes may be putting pressure on consumers and the economy.

Private consumption fell to growth of 2.5% in the quarter compared to 3.3% in the previous quarter. Economists had expected an increase of 3%.

“Compared to the fourth quarter, the slowdown in real GDP in the first quarter primarily reflected a slowdown in consumer spending, exports, and state and local spending, as well as a decline in federal spending,” the BEA said in its press release. “These movements were partially offset by an acceleration in residential investment. Imports accelerated.”

The slower than expected economic growth was accompanied by a surprisingly high inflation rate. The “core” personal consumption spending index, which excludes the volatile food and energy categories, grew 3.7% in the first quarter, above estimates of 3.4% and well above the 2% gain in the previous quarter.

The overall positive data on the U.S. economy in the first quarter has been a key talking point among economists and the Fed itself as they consider why the central bank can keep interest rates high while it waits for further declines in inflation.

“Given the strength of the labor market and the progress on inflation so far, it is appropriate to give restrictive policy even more time to work and let the data and the evolving outlook guide us,” Federal Reserve Chairman Jerome said Powell, April 16th.