New Data On U.S. Economy: Slowed GDP, Elevated Inflation

April 26, 2024

The domestic economy is doing well. Prices were a little bit over the top, but not by much.

Chief economist at investment firm Raymond James, Eugenio Alemán, on the latest reading on the United States economy reflecting a slowdown in gross domestic product (GDP) and firmer than expected inflation.

Big Picture: While some believe the new data on the U.S. economy points to positive signs ahead, others have a differing outlook: “This was a worst of both worlds report – slower than expected growth, higher than expected inflation,” chief investment officer of CIBC Private Wealth US David Donabedian said. Following Thursday’s news on quarterly inflation and GDP (the total value of goods and services produced within a country’s borders in a specific period), opinions on when the Federal Reserve may decrease its federal funds rate have shifted, with many investors expecting only one or two potential cuts beginning in September. The federal funds rate is currently at its highest level in 20+ years as the bank works to combat elevated inflation.

The new data reflected consumers continuing to spend, though at a lower level than in the previous quarter. Chief economist at LPL Financial, Jeffrey Roach said, “The economy will likely decelerate further in the following quarters as consumers are likely near the end of their spending splurge. Savings rates are falling as sticky inflation puts greater pressure on the consumer. We should expect inflation will ease throughout this year as aggregate demand slows, although the path to the Fed’s 2% target still looks a long ways off.”

Important To Note: Thursday’s reading on GDP is an initial reading and subject to revision.

Read More: GDP growth slowed to a 1.6% rate in the first quarter, well below expectations (CNBC)

Mix of Slowing Growth, Firm Inflation Worries Investors (The Wall Street Journal)

US growth slowed sharply last quarter to 1.6% pace, reflecting an economy pressured by high rates (The Associated Press)

by Leah Grainery, based in Texas