US Q1 GDP slows to 1.6%, misses estimates

US Q1 GDP:  US economy saw a modest annualised expansion of 1.6 per cent in Q1 2024, down from 3.4 per cent in preceding quarter and falling short of projected 2.5 per cent, according to vance estimate of gross domestic product released by Commerce Department's Bureau of Economic Analysis on Thursday. 

This marks a second consecutive quarterly slowdown and represents lowest growth rate since contractions experienced in first half of 2022, according to vance estimate.

indication of a decelerating US economy suggests need for earlier-than-anticipated justments to interest rates.

Economists, surveyed by Reuters, h projected a range of GDP growth rates from 1.0 per cent to 3.1 per cent, indicating uncertainty surrounding economic performance. fourth quarter h seen a stronger expansion, with economy growing at a 3.4 per cent rate.

Despite first-quarter moderation, economy remains on a trajectory exceeding non-inflationary growth rate of 1.8 per cent as identified by US central bank officials. International Monetary Fund recently revised its 2024 growth forecast upward to 2.7 per cent, citing robust employment and consumer spending. Monthly job gains averaged 276,000 during first quarter, surpassing previous quarter's average of 212,000.

Consumer spending slowed to 2.5 per cent from 3.3 per cent, primarily driven by a decline in goods consumption (-0.4 per cent vs. 3 per cent), while spending on services accelerated to 4 per cent from 3.4 per cent. 

Non-residential investment also moderated to 2.9 per cent from 3.7 per cent, mainly due to a decrease in structures, although investment in equipment rebounded to 2.1 per cent from -1.1 per cent, and investment in intellectual property products accelerated to 5.4 per cent from 4.3 per cent. 

Looking ahe, government spending increased at a much slower rate (1.2 per cent vs. 4.6 per cent), and exports experienced a sharp deceleration (0.9 per cent vs. 5.1 per cent), while imports surged (7.2 per cent vs. 2.2 per cent). 

Meanwhile, private inventories subtracted 0.35 percentage points from growth compared to -0.47 percentage points previously. Conversely, residential investment surged at a double-digit pace of 13.9 per cent compared to 2.8 per cent previously.

Since late 2022, US economy has continued to outperform expectations, defying concerns following Federal Reserve's aggressive interest rate hikes aimed at curbing inflation. This resilience has been attributed to various factors, including consumers capitalizing on lower mortgage rates and businesses restructuring debt ahe of tightening cycle.

(With Reuters inputs)