Shock slowdown in US economic growth in first three months of 2024 sparks fears of downturn and sends stocks plummeting
- Gross domestic product (GDP) fell to 1.6 percent, new data show
- The figure surprisingly fell below economists’ predictions of 2.4 percent
- The lower-than-expected release caused shares to plummet Thursday morning
The US economy is finally showing signs of cooling as growth fell to 1.6 percent in the first three months of the year.
Economists polled by Reuters had forecast that gross domestic product (GDP) would rise to 2.4 percent.
The lower-than-expected data released by the Commerce Department’s Bureau of Economic Analysis sent stocks lower Thursday morning.
The Dow Jones Industrial Average fell 1.7 percent, or 650 points, while the S&P 500 lost 1.4 percent.
Despite the slight downturn, Americans continue to spend heavily on health care, insurance and other services, the Commerce Department said.
The US economy is finally showing signs of cooling as growth fell to 1.6 percent in the first three months of the year
However, there was a dip in spending on goods such as cars and gasoline.
It comes amid speculation about when the Federal Reserve will start cutting interest rates, which are currently at a 23-year high.
The Fed’s aggressive tightening cycle was aimed at halting rising inflation, which peaked at an annual rate of 9.1 percent in January 2022.
Officials have a clear goal of bringing inflation within the 2 percent target range. However, in March the annual interest rate rose slightly to 3.5 percent.
The lecture destroyed hopes of an impending interest rate cut. Only 6.4 percent of investors currently expect a rate cut at the Fed’s next meeting on May 1 CME FedWatch tool.
The majority (more than 57 percent) anticipates cuts by September at the latest.
The International Monetary Fund last week upgraded its forecast for U.S. growth in 2024 to 2.7 percent from the 2.1 percent forecast in January, citing stronger-than-expected employment and consumer spending.
Job gains in the first quarter averaged 276,000 per month, compared to the average of 212,000 in the October-December quarter.
The economy has defied prophecies of doom since late 2022, partly because households locked in lower mortgage rates while companies refinanced their debt before rates started rising, economists said.