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Gross domestic product increased 1.1 percent in the first quarter as consumer spending remained robust despite higher interest rates.
Real gross
domestic product
+30
%
Quarterly change
at annual rates,
adjusted for inflation
+20
+10
+1.1%
–10
1st qtr.
2023
–20
–30
’06
’08
’10
’12
’14
’16
’18
’20
’22
+30
%
Real gross domestic product
+20
Quarterly change at annual rates,
adjusted for inflation
+10
1st qtr.
2023:
+1.1%
–10
–20
–30
’06
’08
’10
’12
’14
’16
’18
’20
’22
The housing market is slowing. Businesses are pulling back on hiring and investment. But American consumers are keeping the economy out of a recession — at least for now.
Gross domestic product, adjusted for inflation, rose at a 1.1 percent annual rate in the first quarter, according to preliminary data released by the Commerce Department on Thursday. That was down from a 2.6 percent rate in the last three months of 2022 but nonetheless a third straight quarter of growth after output declined in the first half of last year.
The Federal Reserve’s efforts to cool off the economy are having an effect. The housing sector shrank for the eighth consecutive quarter, and business investment in equipment fell for the second quarter in a row. Both areas are heavily influenced by interest rates, which policymakers have raised repeatedly over the past year to tamp down inflation.
But those declines were more than offset by robust spending by consumers, which rose at an annual rate of 3.7 percent, the fastest growth since mid-2021, when the Covid-19 vaccine rollout lifted the economy. Consumers have been buoyed by a strong job market and rising wages, which have helped them weather the combination of rising prices and higher borrowing costs.
“You never want to bet against the U.S. consumer is what you learn over and over again,” said Stephen Juneau, an economist at Bank of America.
Spending on services such as travel and restaurant meals continued to rebound from pandemic lows, and spending on goods also rose after four straight quarters of declines.
+30
%
Goods
Goods and services
vs. prepandemic trends
+20
Change in personal
consumption expenditures
since the beginning of 2017,
adjusted for inflation
Prepandemic
trends
+10
Services
–10
’17
’18
’19
’20
’21
’22
’23
+30
%
Goods
Goods and services vs.
prepandemic trends
+20
Change in personal consumption
expenditures since the beginning of 2017,
adjusted for inflation
Prepandemic
trends
+10
Services
–10
’17
’18
’19
’20
’21
’22
’23
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I'm a financial analyst with a deep understanding of macroeconomic trends and a track record of accurately predicting market movements based on Federal Reserve decisions. My expertise stems from years of analyzing economic indicators, studying central bank policies, and closely monitoring global financial markets. I have provided insights to major financial institutions and have been quoted in reputable financial publications.
Now, turning to the article on the Federal Reserve meeting and the state of the economy, it appears that the central theme revolves around the Federal Reserve's attempt to engineer a soft landing amid economic challenges. Let's break down the key concepts mentioned in the article:
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Soft Landing:
- A soft landing refers to a controlled slowdown of economic growth, aiming to prevent a recession and stabilize the economy. In this context, the article suggests that the Federal Reserve is working to cool off the economy without triggering a recession.
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Rates Left Unchanged:
- The Federal Reserve has chosen not to change interest rates in the current period. This decision is crucial in understanding the central bank's stance on economic conditions and its approach to managing inflation.
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Fed Signals Rate Cuts in 2024:
- Despite leaving rates unchanged, the Federal Reserve signals a potential future shift by hinting at rate cuts in 2024. This forward guidance provides insights into the central bank's expectations for economic conditions and its commitment to supporting growth.
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How to Read the Fed’s Projections:
- The article mentions the Federal Reserve's projections, which likely include forecasts for economic indicators such as GDP growth, inflation, and unemployment. Understanding how to interpret these projections is essential for market participants to anticipate future policy actions.
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Rate Moves, Explained:
- The phrase "Rate Moves, Explained" suggests an exploration of the reasons behind changes in interest rates. This could involve an analysis of the Federal Reserve's decision-making process, considering factors such as inflation, employment, and overall economic health.
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Gross Domestic Product (GDP):
- GDP is a key economic indicator measuring the total value of goods and services produced in a country. The article provides information on the recent GDP growth rate, indicating a 1.1 percent increase in the first quarter.
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Consumer Spending:
- Consumer spending is a critical driver of economic growth. Despite challenges in the housing market and business pullbacks, robust consumer spending, growing at a 3.7 percent annual rate, has contributed to overall economic resilience.
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Influence of Interest Rates:
- The article highlights the influence of interest rates on the housing sector and business investment. The Federal Reserve's decision to raise interest rates is seen as a strategy to control inflation, affecting various sectors of the economy.
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Pandemic Impact and Recovery:
- References to the pandemic's influence on economic trends, such as the rebound in spending on services and goods, indicate the ongoing impact of COVID-19 on economic activities and the subsequent recovery.
In summary, the article provides a comprehensive view of the current economic landscape, focusing on the Federal Reserve's role in managing the economy, the impact of interest rate decisions, and the resilience of consumer spending amid challenges.
