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In the first quarter of this year, the economy grew at a seasonally adjusted annual rate of 1.3%, which represents a three-tenths of a percentage point downward revision.

The correction showed GDP growth reduced to 1.2%, which was what economists had predicted.

The newest update, the second of three, shows GDP growth in the first quarter was lower than 3.4%.

Over a few weeks, when experts gain a clearer view of the economy’s performance in the first quarter, the Bureau of Economic Analysis changes its GDP estimates.

The GDP figure for the first quarter of 2023 is lower than it was for the entire year, when the economy grew by a robust 2.5 percent.

Gus Faucher, chief economist at PNC, stated, “The U.S. economy should continue to expand into 2024, albeit at a slower pace than last year because of high interest rates remaining a drag.” Because of robust job growth and incomes rising faster than inflation, consumer fundamentals are strong. In 2024, real GDP growth will be close to the economy’s long-run potential, at less than 2%.

Lower consumer spending was partly responsible for the first quarter’s poorer growth. This may have been prompted by the Federal Reserve’s attempts to control inflation by maintaining higher interest rates for longer periods of time.

Since the Fed raised its interest rate target to 5.50% from 5.25% in response to excessively high inflation, experts have been predicting for months that the GDP will contract. Usually, higher rates result in a slowdown in economic production.

However, the strong GDP data from the past few quarters and the underlying strength of the labor market have given the Fed some justification to maintain higher interest rates for an extended period of time.

President Joe Biden has a talking point in his reelection campaign because of the positive GDP growth.

Still, the general public has a very poor opinion of the way he has handled economic matters.

A recent Harris poll for the Guardian indicates that 56% of Americans believe the country is experiencing a recession. The National Bureau of Economic Research, a private academic organization, defines a recession as a large fall in economic activity that spreads around the economy and lasts more than a few months.

Not only has the economy’s overall output continued to grow, but the job market has also maintained its strength, and the unemployment rate is low.

In April, the economy created 175,000 new jobs, yet the jobless rate did not rise above 4%.

Although the Federal Reserve Bank of Atlanta’s “GDP Now” tracker projects that GDP growth in the second quarter of this year will be 3.5%, the official GDP statistics for the second quarter will not be available until July.

Author: Scott Dowdy

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