US Q1 Economic Growth Downwardly Revised To 1.3%: Consumer Spending Falters

U.S. economic growth was downwardly revised in the first quarter of 2024 compared to the advance estimate, with a corresponding downward adjustment in inflation for the same period.

At the end of March 2024, the annualized real gross domestic product (GDP) growth rate stood at 1.3% compared to the end of December 2023, according to the second estimate released Thursday by the Bureau of Economic Analysis.

Q1 2024 GDP: Key Highlights

• The GDP growth rate of 1.3% in the first quarter marks a downward revision from the advance estimate of 1.6%, and it also reflects a marked deceleration in the pace of growth from the 3.4% rate observed in the final quarter of 2023. “The update primarily reflected a downward revision to consumer spending,” the BEA wrote.
• The Core Personal Consumption Expenditure (PCE) price index, the Federal Reserve's preferred inflation metric, rose by 3.6% in the first quarter of 2024. This marks a slight downward revision from the previously anticipated 3.7% and represents a significant increase from the 2% recorded in the fourth quarter of 2023.
• The headline PCE price index was 3.3% in the first quarter of 2024, showing a marginal downtick from 3.4% in the preceding estimate, but sharply above the 1.8% seen in the fourth quarter of 2023.
• Real consumer spending grew by 2%, lower than both the previously estimated 2.5% and the 3.3% growth seen in the last quarter of 2023.
• Corporate profits contracted by 1.7% according to the preliminary estimate, marking an abrupt drop from the 3.9% growth recorded in the fourth quarter of 2023.

Jobless Claims Rise After 2 Weeks Of Declines

Simultaneously with the GDP release, the Labor Department issued the usual weekly update on unemployment benefits.

The number of Americans filing for jobless claims increased from 215,000 to 219,000 during the week ending May 25, slightly exceeding the expected 218,000.

The four-week average of jobless claims rose from 219,750 to 222,500, marking the highest level since mid-September 2023.

Market Reactions

Futures on U.S. equity indices trended lower during Thursday’s premarket session, but slightly trimmed losses after the data releases.

Contracts on the blue-chip index were 0.7% lower at 8:37 a.m. in New York. S&P 500 futures were 0.1% lower, after the SPDR S&P 500 ETF Trust SPY closed 0.7% lower on Wednesday.

Treasury yields fell by about 3 basis points across the curve. The benchmark 10-year yield fell to 4.57%.

Gold, as tracked by the SPDR Gold Trust GLD, rose 0.3%.

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