Preliminary data released by the Commerce Department on Thursday showed U.S. economic growth slowed by much more than expected in the first three months of 2023.
The report said real gross domestic product increased by 1.1 percent in the first quarter after jumping by 2.6 percent in the fourth quarter of 2022. Economists had expected the pace of GDP growth to slow to 2.0 percent.
The Commerce Department said the slowdown in GDP growth primarily reflected a downturn in private inventory investment and a slowdown in non-residential fixed investment.
Meanwhile, an acceleration in consumer spending, an upturn in exports, and a smaller decrease in residential fixed investment helped limit the downside.
The report consumer spending, which accounts for roughly two-thirds of the U.S. economy, surged by 3.7 percent in the first quarter after climbing by 1.0 percent in the fourth quarter.
The first quarter GDP growth also reflected increases in exports, federal government spending, state and local government spending, and nonresidential fixed investment.
The positive contributions were partly offset by decreases in private inventory investment and residential fixed investment as well as an increase in imports, which are a subtraction in the calculation of GDP.
“The Q1 GDP report showed that aside from a pop in real consumer spending in January, economic growth was not very resilient last quarter and recent data signal that soft economic growth continues into the second quarter,” said Nationwide Chief Economist Kathy Bostjancic.
She added, “Meanwhile inflation, especially at the core services level remains elevated and sticky – an unfavorable mix of slower growth but still high inflation.”
The Commerce Department said the personal consumption expenditures price index soared by 4.2 percent in the first quarter after surging by 3.7 percent in the fourth quarter. Economists had expected another 3.7 percent jump.
Excluding food and energy prices, the PCE price index shot up by 4.9 percent in the first quarter compared with a 4.4 percent spike in the fourth quarter.
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