US GDP Grows 2.0% in Q1 2023: Positive Signs from Consumer Spending, Exports

Highlights

• Q1 2023 GDP growth: 2.0%
• Factors contributing to growth: consumer spending, exports, government spending
• Uncertainty persists: global trade tensions and consumer sentiment fluctuations
• Initial weekly jobless claims took an unexpected and significant dive, declining by 26,000

GDP Grows Moderately

Real gross domestic product (GDP) showed a moderate increase in the first quarter of 2023, according to the latest estimate released by the Bureau of Economic Analysis. The GDP growth rate for the period stood at 2.0 percent, marking a slight improvement compared to the previous quarter’s growth rate of 2.6 percent.

Data Drives GDP Estimate

This updated estimate is based on more comprehensive and reliable data, surpassing the previous estimate of a 1.3 percent increase. The revisions primarily stemmed from positive adjustments in exports and consumer spending, although they were partially offset by downward revisions in nonresidential fixed investment and federal government spending. It’s worth noting that imports, which are subtracted from the GDP calculation, were revised downward.

Multiple Factors Boost GDP

The growth in real GDP during the first quarter can be attributed to several factors. Consumer spending experienced a notable increase, along with a rise in exports, state and local government spending, federal government spending, and nonresidential fixed investment. However, this growth was partially offset by declines in private inventory investment and residential fixed investment. Furthermore, imports also saw an increase, which affects the overall GDP calculation.

Economic Uncertainty Persists

Looking ahead, the short-term outlook for the economy remains uncertain. Factors such as global trade tensions, geopolitical events, and fluctuations in consumer sentiment could impact future GDP growth. While the first quarter showed moderate growth, it is important to closely monitor these key indicators to assess whether the economy will continue on a bullish trajectory or face headwinds in the coming months.

Outlook:  GDP Trending on Back of Exports, Consumer Spending Amid Risks

In summary, the latest estimate reveals that the U.S. economy experienced a 2.0 percent increase in real GDP during the first quarter of 2023. The upward revisions in exports and consumer spending contributed to this growth, although some sectors experienced downward revisions. As the economy moves forward, it is crucial to keep a watchful eye on the various factors that could influence future GDP trends.

Initial Jobless Claims Plummet, Surpassing Expectations

In a surprising turn of events, the initial weekly jobless claims took a significant drop, declining by 26,000 to reach 239,000 for the week ending Saturday. This unexpected decrease caught the markets off guard and exceeded economists’ consensus calls, which had projected the claims to come in at 266,000. The previous week’s level was also revised upward by 1,000 to 265,000.

Slight Increase in Four-Week Moving Average of Jobless Claims

However, when looking at the four-week moving average for new claims, which provides a more reliable measure of the labor market by smoothing out week-to-week volatility, there was a slight increase of 1,500 to 257,500. Notably, this represents the highest level for the moving average since November 13, 2021. The previous week’s four-week moving average was revised up by 250 to 256,000, as reported by the U.S. Labor Department.

Continuing Jobless Claims Decline

On the other hand, continuing jobless claims, which indicate the number of people already receiving benefits, witnessed a decrease of 19,000 to reach 1,742,000 during the week ending June 17. The four-week moving average for continuing claims also decreased by 13,000 to 1,757,500. However, it’s important to note that the previous week’s four-week moving average was revised up by 500 to 1,770,500.