The U.S. economy grew at 1.6 percent in the first quarter of 2024 according to the first advance estimate released by the Bureau of Economic Analysis (BEA) on Thursday morning, a significant slowdown from the fourth quarter of 2023 in which GDP increased 3.4 percent. Economists had expected GDP growth to slow in Q1 — but not this much — projecting around 2.5 percent.
GDP dipped more than expected in the first quarter of 2024 according to Thursday’s advance estimate:
— Spencer Brown (@itsSpencerBrown) April 25, 2024
-Q4 GDP: +3.4%
-Q1 GDP expectation: +2.5%
-Q1 GDP actual: +1.6%
According to the BEA release, "the deceleration in real GDP in the first quarter primarily reflected decelerations in consumer spending, exports, and state and local government spending and a downturn in federal government spending," movements "partly offset by an acceleration in residential fixed investment" and an acceleration in imports.
While the economy slowed more than expected from Q4 2023 to Q1 2024, inflation surged upward. The price index for GDP purchases jumped to 3.1 percent in the first quarter of 2024 from 1.9 percent in the last quarter of 2023. The personal consumption expenditures (PCE) price index jumped 3.4 percent in Q1 after rising 1.8 percent in Q4. The core PCE price index — excluding food and energy costs — increased even more in Q1 to 3.7 percent compared to Q4's 2.0 percent level. All these numbers are above what economists expected and higher than the Federal Reserve's target of just 2.0 percent.
Across the board, inflation is not "coming down" as President Biden continues to falsely claim.
"This weak economy reflects the view of American small business owners," said Job Creators Network CEO Alfredo Ortiz reacting to the Q1 data. "According to JCN's national poll of small business owners, two-thirds say current economic conditions could force them to close, he reminded. "Slow economic growth is a direct result of bad Democratic policies that have caused stubbornly high inflation, overregulation, and a credit crunch." Invoking President Biden's proposed capital gains tax rates, Ortiz warned such "Democrat tax increases would grind even this slow growth to a halt. Voters who want a return to a robust economy should remember this on Election Day."
The data released on Thursday morning puts the Federal Reserve and its chairman Jerome Powell in a bind: if the Fed follows through on its plans to cut interest rates already at their highest level since early 2001, inflation would continue to surge. If Powell keeps rates at their current level or raises them, a significantly slowing economy could flip into a recession.
Wall Street reflected the perilous state of the economy revealed in the Q1 GDP estimate, with the Dow, Nasdaq, and S&P 500 taking a dive on the news:
⚠️BREAKING:
— Investing.com (@Investingcom) April 25, 2024
*U.S. STOCKS PLUNGE, VIX SPIKES AFTER WEAK GDP REPORT; DOW TUMBLES 500 POINTS $SPY $QQQ $VIX 🇺🇸 pic.twitter.com/6onOKYqpVP
Biden has already, as usual, cherry-picked numbers to claim that the Q1 GDP "report shows the American economy remains strong, with continued steady and stable growth." But there's nothing stable about an economy that just shrunk more than economists expected while inflation continues to explode. Biden can spin as much as he wants but, even by omitting the truth of the full report, he won't be able to hide the everyday pain an economy in this condition creates for Americans.
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