The United States economy expanded at a slower pace than expected in the first quarter of 2024, a recent report from the Bureau of Economic Analysis revealed.
Stocks fell on Thursday after a sharply lower-than-expected first-quarter US GDP reading raised questions about the health of the US economy. Bitcoin also fell near the $62.800 zone following the data, currently BTC is trading near $64.161,37 down 1%.
Gross Domestic Product (GDP) grew at an annualized rate of just 1,6%, contrasting with forecasts of 2,5% made by economic analysts. This growth represents the slowest pace seen in the last two years, signaling an economic slowdown amid rising inflation.
Despite modest GDP growth, the core Personal Consumption Expenditure index, excluding food and energy, recorded an increase of 3,7% in the quarter, exceeding expectations of 3,4%. This indicator is particularly significant as it reflects an increase in inflation, further distancing itself from the 2% target pursued by the Federal Reserve.
The current context presents challenges for investors and the US central bank, who are paying attention to the timing of possible interest rate cuts and the search for an economic “soft landing”. Amid these conditions, Gregory Daco, chief economist at EY, commented: “This report throws cold water on the misleading narratives of a reaccelerating economy. As we enter spring, the underlying growth mix continues to signal robust momentum, but demand growth is cooling gently, leading to easing inflationary pressures.”
Analysts point out that one of the main factors for the lower-than-expected growth was the weak performance of trade and exports, which contributed negatively to GDP by approximately 1,2 percentage points. Still, Ryan Sweet, chief economist at Oxford Economics, points out: “The slowdown in GDP growth will not worry the Fed, as the details are better than the headline suggests.
On the other hand, Deutsche Bank US senior economist Brett Ryan told Yahoo Finance that the GDP result “really belies the underlying strength” of the economy. Ryan also highlights that there is no general increase in concern about an economic slowdown and predicts a recovery in the areas of inventories and exports in the coming quarters.
This economic situation provoked an immediate reaction in the financial market, with the yield on the 10-year US Treasury bond rising almost seven basis points, reaching 4,7%, the highest level since November 2023. The main market indices, including the S&P 500, Dow Jones Industrial Average and Nasdaq Composite, recorded drops of more than 1% after the data was released.
