US Economy Slows in First Quarter

The US economy weakened noticeably in the first quarter, measured from January through March. The US Department of Commerce released figures showing that, over the period, the economy slowed to an annual pace of just 1.1%, a marked deceleration from growth in the prior two quarters that had been measured at an average of 2.8%.
One of the main contributors was the fact that businesses had reduced their inventories in anticipation of a recession. Business inventory cuts took away roughly 2.3 percentage points from overall growth.
Another contributor came in the form of high interest rates that hammered the housing market. The latter is usually vulnerable to higher loan rates and suffered a contraction that was exacerbated by tightening bank lending standards linked to the failure last month of two major American banks.
Consumer spending, which accounts for about 70% of US economic activity, remained strong, growing at an annualized rate of 3.7%, the fastest pace in nearly two years.
What does this mean for me?
Economists had been expecting GDP to grow at a rate of 1.9% in the first quarter of the year. The economy’s slowdown reflected the impact of the Federal Reserve’s aggressive drive to tame inflation with nine interest rate hikes over the past year. The surge in borrowing costs has been expected to send the economy into a recession sometime this year. However, inflation has steadily eased from the four-decade high it reached in 2022 while remaining far above the Fed’s 2% target.