U.S. GDP Growth Slows to 1.3% in Q1 2024

James Hyerczyk
Updated: May 30, 2024, 15:24 GMT+00:00

Key Points:

  • U.S. GDP expands at 1.3% in Q1 2024, a drop from 3.4% in Q4. The second estimate highlights a significant economic deceleration.
  • Consumer spending, residential investment, and government spending drive GDP growth. However, reduced private inventory investment and higher imports impact the overall figure.
  • Corporate profits decrease by $21.1 billion in Q1 2024, indicating economic slowdown. This contrasts sharply with a $133.5 billion rise in the previous quarter.

GDP Growth Overview

The U.S. economy expanded at an annual rate of 1.3% in the first quarter of 2024, according to the Bureau of Economic Analysis’ second estimate. This represents a significant slowdown from the 3.4% growth seen in Q4 2023. The revision from the initial 1.6% estimate was primarily due to reduced consumer spending.

Factors Influencing GDP

The GDP growth in Q1 was driven by increases in consumer spending, residential fixed investment, nonresidential fixed investment, and state and local government spending. However, these gains were partially offset by a decline in private inventory investment. Imports, which negatively impact GDP calculations, also increased.

Deceleration Compared to Previous Quarter

The deceleration from Q4 to Q1 is attributed to slower growth in consumer spending, exports, and state and local government spending, along with a decrease in federal government spending. This was somewhat counterbalanced by a boost in residential fixed investment and accelerated imports.

Current Dollar GDP and Price Indexes

In current dollar terms, GDP rose by 4.3%, or $298.9 billion, to $28.26 trillion in Q1, slightly down from earlier estimates. The price index for gross domestic purchases increased by 3.0%, and the personal consumption expenditures (PCE) price index rose by 3.3%, both seeing minor downward revisions. Excluding food and energy, the PCE price index increased by 3.6%.

Personal Income and Savings

Current-dollar personal income grew by $404.4 billion, driven by higher compensation and government social benefits. Disposable personal income increased by $266.7 billion, or 5.3%, with real disposable income rising by 1.9%. Personal saving reached $796.6 billion, with a saving rate of 3.8%.

Corporate Profits and GDI

Real gross domestic income (GDI) increased by 1.5% in Q1, down from 3.6% in Q4. Corporate profits fell by $21.1 billion, contrasting with the previous quarter’s $133.5 billion increase. Financial corporations’ profits rose significantly, while nonfinancial corporations saw a substantial decrease.

Market Forecast: Bearish Outlook

Given the deceleration in GDP growth, declining corporate profits, and slower consumer spending, the short-term outlook for the U.S. economy appears bearish. Traders should brace for potential market volatility as these economic indicators suggest weakening economic momentum.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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