by Peter C. Earle
The American Institute for Economic Research
The release of 1st quarter 2024 Gross Domestic Product (GDP) on April 25th surprised virtually all forecasters. The first three months of 2024 were characterized by a notable deceleration in US economic growth, marking an almost two-year low. The same data release revealed that inflation, as measured by US GDP Personal Consumption Core Price Index (quarter-over-quarter), accelerated 3.7 percent, ahead of an expected 3.4 percent, disrupting a brief period characterized by robust demand and subdued price pressures. Those conditions previously fostered optimism for a so-called soft landing.
The initial estimate of GDP showed an annualized quarterly growth rate of 1.6 percent, falling short of all economists’ predictions (surveys anticipated 2.5 percent). This deceleration was predominantly attributed to a rapid decline of personal consumption, which increased at a slower-than-anticipated pace of 2.5 percent (versus estimates of 3.0 to 3.5 percent). Moreover, a widening trade deficit exerted the most significant downward pressure on US economic growth since 2022. These figures signal a significant loss of momentum after a surprisingly robust economic performance last year.