GDP Shows Economic Growth Slowed in First Quarter
May 1, 2023
Economic growth slowed considerably during the first three months of the year as higher interest rates and still-high inflation took hold, adding to worries about a further slowdown and possible recession later in the year. Strong consumer spending offset a pullback in business spending and investments and a slump in the housing market.
U.S. gross domestic product (GDP), a measure of the value of all the goods and services produced in the country, rose at an inflation and seasonally-adjusted 1.1% annual rate during the period from January to March, according to the Commerce Department. That’s a significant slowdown from 2.6% growth during the fourth quarter of last year. Economists surveyed by Dow Jones had been expecting growth of 2%.
The slowdown in growth is primarily due to a decline in private inventory investment and a deceleration in nonresidential fixed investment, according to the Commerce Department’s report. The inventory slowdown alone took 2.26 percentage points off the headline number. Gross private domestic investment tumbled 12.5%.
Personal consumption, which accounts for roughly 70% of all economic activity, was one of the few bright spots. Consumer spending rose at an annual rate of 3.7%, the fastest growth since mid-2021, when the economy was rebounding from the pandemic. However, spending slowed as the quarter progressed and forecasters expect it to keep slowing amid headlines about layoffs, bank failures, and the growing likelihood of a recession in the coming months.