The United States experienced a significant deceleration in economic growth during the initial months of 2023, as indicated by the Bureau of Economic Analysis (BEA) in their data released on Thursday. The Gross Domestic Product (GDP), a gauge of all goods and services produced, increased at an annualized rate of just 1.1% in the first quarter, a substantial decline from the 2.6% growth witnessed in Q4 2022.
Experts had anticipated an annualized growth rate of 2% for the first quarter. They emphasized that a substantial portion of the growth occurred in January due to unseasonably warm weather; however, economic activity saw a rapid decline by March.
Although retail sales experienced a dip in March, impacted by inflation and increased borrowing costs, household spending still managed to increase by 3.7% during Q1 compared to the last three months of 2022. Nevertheless, business investment saw a sharp 12.5% drop between the end of 2022 and the beginning of 2023, which weakened the economy.
Economists are now expecting a rapid decline in economic growth. The Conference Board predicts a 1.8% contraction in the US GDP for Q2, raising concerns about an impending recession.
Years of elevated inflation and a series of interest rate hikes by the Federal Reserve targeting economic slowdown have finally led to a cooling of consumer demand. Additionally, banks have reduced commercial lending in the aftermath of Silicon Valley Bank's failure, hindering the growth of businesses dependent on financing.
Q&A Section:
Q: What was the GDP growth rate in the first quarter of 2023?
A: The GDP growth rate in the first quarter of 2023 was 1.1%.
Q: How did household spending change during the first quarter of 2023?
A: Household spending increased by 3.7% during the first quarter of 2023 compared to the last three months of 2022.
Q: What happened to business investment between the end of 2022 and the beginning of 2023?
A: Business investment plunged by 12.5% between the end of 2022 and the beginning of 2023.
Q: What does the Conference Board forecast for the US GDP in Q2 2023?
A: The Conference Board forecasts a 1.8% contraction in the US GDP for Q2 2023.
