A surge in imports, which subtract from GDP, contributed nearly 1 percentage point to the reduced growth rate for the first quarter. Additionally, businesses cut back on their inventories, another factor that held back growth.
Paul Ashworth, chief North America economist at Capital Economics, acknowledged the volatility of imports and inventory figures but emphasized the overall resilience of the economy’s core components. “There is still a lot of positive underlying momentum,” he said.
Inflation remains a significant concern, with a report on Friday showing a jump to a 3.4 percent annual rate from January through March, up from 1.8 percent in the previous quarter. Core inflation, which excludes volatile food and energy prices, rose to a 3.7 percent rate from 2 percent in the fourth quarter of 2023.
Consumer spending, which is a crucial indicator of economic health, grew at a 2.5 percent annual rate from January through March. This rate, while solid, marked a decrease from over 3 percent in the previous two quarters.
Services spending surged by 4 percent, the fastest pace since mid-2021, but spending on goods like appliances and furniture slightly declined by 0.1 percent, the first drop since the summer of 2022.
