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The Commerce Department released preliminary data on Thursday showing that first-quarter US economic growth was slower than anticipated.
The greatest economy in the world saw real gross domestic product (GDP) grow at an annual pace of 1.1% from January to March, dropping from 2.6% in the last quarter of 2022. Economic experts had anticipated that the reading would be 2.0%.
A decline in private inventories and nonresidential fixed investment mainly caused the drop from the fourth quarter. According to a statement from the Commerce Department, an increase in consumer expenditure partially offset these trends.
The data are released when the Federal Reserve has aggressively raised interest rates over the past year to reduce rising inflation.
The Federal Reserve is anticipated to increase borrowing prices by another 25 basis points the following week, bringing the crucial federal funds target down from 5% to 5.25%. Officials may be mulling over a subsequent pause in the tightening cycle to give themselves time to examine the impact of last month’s turmoil in the financial services sector.
A sudden drop in the value of regional lender First Republic’s stock has sparked new concerns that the financial crisis may be temporarily reduced rather than being over entirely. The stock of First Republic fell by 29.75% on Wednesday, continuing a string of sharp drops that began earlier in the week. First Republic reported $100 billion in customer withdrawals in March.
In other areas, the number of Americans requesting initial unemployment benefits unexpectedly dropped to 230,000, which could indicate continued tightness in the labour market in the United States. The number was expected to increase slightly to 248,000 but fell from a previously reported total of 246,000. The Fed has raised interest rates to reduce labour demand, hoping this trend will generally lessen inflationary pressures.
Additionally, the weekly data’s volatility was considered by a 4,000-point drop in the four-week moving average, down to 236,000. However, they were still close to their highest level since 2021, even though continuing claims decreased to 1,858,000.
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