U.S. economic growth was much weaker than expected to start the year as consumer spending rose at a slower pace, the Commerce Department reported Thursday.
Gross domestic product, a broad measure of goods and services produced in the January-through-March period, increased at a 1.6% annualized pace when adjusted for seasonality and inflation, according to the department’s Bureau of Economic Analysis.
Economists surveyed by Dow Jones had been looking for an increase of 2.4% following a 3.4% gain in the fourth quarter of 2023 and 4.9% in the previous period.
Consumer spending increased 2.5% in the period, down from a 3.3% gain in the fourth quarter. Fixed investment and government spending at the state and local level helped keep GDP positive on the quarter, while a decline in private inventory investment and an increase in imports subtracted.
There was some bad news on the inflation front as well.
The personal consumption expenditures price index, a key inflation variable for the Federal Reserve, rose 3.4% for the quarter, its biggest gain in a year. Excluding food and energy, core PCE prices rose at a 3.7% pace, well above the Fed’s 2% target. Central bank officials tend to focus on core inflation as a better indicator of long-term trends.
The price index for GDP, sometimes called the “chain-weighted” price index, increased at a 3.1% rate, compared to the Dow Jones estimate for a 3% increase.
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