The Commerce Department revealed the GDP Q1 2024. It showed that US economic growth in the first quarter decreased, with prices increasing faster than anticipated. The gross domestic product (GDP) report, which measures the value of goods and services produced from January to March, saw a 1.6% increase. This was seen after being adjusted for seasonal changes and inflation as per the Commerce Department’s Bureau of Economic Analysis.
US GDP Q1 2024
Economists surveyed by Dow Jones anticipated a 2.4% increase in GDP Q1 2024 for the first quarter. This follows the increase of 3.4% in the fourth quarter of 2023 and 4.9% in the previous period.
According to the GDP report 2024, consumer spending increased by 2.5% during this period, lower than the 3.3% increase in the fourth quarter and less than the 3% estimated by Wall Street.
Fixed investment and government spending at the state and local levels contributed positively to the GDP report 2024. However, a decline in private inventory investment and increased imports offset some of these gains in the GDP Q1 2024. Net exports reduced the growth rate by 0.86 percentage points, while consumer spending contributed 1.68 percentage points to the Gross Domestic Product Report.
Other Aspects of the GDP Report 2024
The price index for GDP report 2024, also known as the “chain-weighted” level, increased at a 3.1% rate, slightly higher than the Dow Jones estimate of 3%.
Markets took a hit after the GDP Q1 2024 report, with Dow Jones futures decreasing over 400 points. Treasury yields increased, with the 10-year note reaching 4.69%.
David Donabedian, CIBC Private Wealth US’s chief investment officer, said that the GDP report 2024 offers the worst of both worlds: slower growth and higher inflation. The GDP Q1 2024 report is pushing investors to rethink expectations of rate cuts, which might lead Fed Chair Jerome Powell to take a more hawkish stance at next week’s Federal Open Market Committee meeting.
The GDP report 2024 arrives as markets are anxious about the Federal Reserve’s next moves regarding interest rates. The federal funds rate is at 5.25% to 5.5%, the highest in about 23 years. Despite this, the Fed has not raised rates since July 2023.
Investors have been reevaluating their expectations for when the Fed might start lowering rates due to inflation. Previously, futures trading had suggested rate cuts to start in September, with possibly one or two cuts this year.
However, after the GDP report 2024, traders now anticipate just one rate cut in 2024, according to calculations by CME Group.
Jeffrey Roach, chief economist at LPL Financials, said that the economy is likely to slow down in the coming quarters as consumers might be reaching the end of their spending spree. He added that with high inflation, consumers might hold back, leading to a decline in savings rates.
He added that although they anticipate the inflation going down as demand slows, reaching the Fed’s 2% target could still take some time.
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