The US economy grew less than initially estimated in the first quarter of this year, the US government reported yesterday, due to weaker consumer spending.
The world’s biggest economy expanded 1.3 percent in the January-to-March period, the US Department of Commerce said, below the 1.6 percent figure published last month. This revision was in line with analysts’ expectations.
Both growth numbers mark a significant deceleration from the 3.4 percent expansion seen in the final quarter of last year.
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While US President Joe Biden and officials maintain that the US economy remains robust, he is struggling to convince voters of his performance on the economic front ahead of November’s presidential election.
“The update primarily reflected a downward revision to consumer spending,” the commerce department said of yesterday’s revision.
Overall, GDP growth in the first quarter was supported by consumer spending, business investment and government spending.
But outlooks on the US economy have become gloomier with reports of rising uncertainty and worries over risks, even though growth broadly continued recently, the Federal Reserve said on Wednesday.
The views come as discretionary spending cooled and consumers became more sensitive to costs in recent weeks, while job gains were largely modest to negligible, the US central bank said in its “Beige Book” survey of economic conditions.
Across the US, economic activity remained positive from early last month to the first half of this month. But conditions varied across industries and districts, the report said.
After rapidly hiking interest rates in 2022, the Fed has in recent months held them at a high level in hopes of stamping out stubborn inflation by lowering demand.
But at policymakers’ most recent meeting this month, they cited a lack of further progress towards a two percent inflation target in keeping the benchmark lending rate unchanged.
All eyes are on indications that the Fed could start cutting rates — and a cooler economy could spur such optimism.
With prices still rising, consumers in most of the Fed’s 12 districts “pushed back against additional price increases,” leading to smaller profit margins, the Fed report said.
Meanwhile, some districts have “noted a pullback in hiring expectations amid weaker business demand.”
“Overall outlooks grew somewhat more pessimistic amid reports of rising uncertainty and greater downside risks,” it added.
Such uncertainties include the level of consumer demand, timing of Fed rate cuts and outcome of the US presidential election.
The Fed is due to hold its next policy meeting in the middle of next month.
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