The April 27 report from the US Department of Commerce showed that the country’s gross domestic product (GDP) increased by 1.1% in the first three months of last year. In a survey by the Dow Jones news agency, economists forecast a 2% increase.
Previously, the US economy grew by 2.6% in the fourth quarter of 2022 and increased by 2.1% in the whole of last year.
The report also shows that the personal consumption expenditures (PCE) price index, an inflation measure favored by the US Federal Reserve (Fed) and used as an important basis for monetary policy, increased by 4 .2% in the first quarter, far exceeding the forecast of a 3.7% increase. Excluding energy and food and food prices, core PCE increased by 4.9%, compared with the 4.4% increase recorded in the previous period.
“People are still spending even though prices are going up. Overall, I think this report shows that the economy is still strong despite the weak GDP data. Signs that demand is strong and prices are still rising were evident today,” said Citigroup economist Veronica Clark.
Like most Wall Street forecasters, Citi predicts the U.S. economy will eventually fall into a recession, but Clark said the timing of the recession is hard to pinpoint. “Many were expecting a further slowdown in the economy right now, but we are showing signs that the situation has not yet reached that point. So it doesn’t look like we’re going to fall right into a recession. I think Q1 data has helped confirm that, especially when consumption is still strong, “said the expert.
The report showed that consumption increased by 3.7% in the first quarter and exports increased by 4.8%. Total domestic investment of the private sector decreased by 12.5%.
“The US economy may be at a turning point, as consumption has softened in recent months. The reflective nature of the GDP report can cause misinterpretations in the market, as consumers were still spending heavily in January, but they have slowed down their spending from March onwards. and becoming more and more pessimistic about the future,” said Jeffrey Roach, chief economist at LPL Financial.
Other data released on April 27 from the US Department of Labor shows that the number of first-time jobless claims for the week ended April 22 was 230,000, down 16,000 from the previous week and lower than the previous figure. forecast number 249,000 orders.
The GDP report comes as the Fed seeks to cool down the economy to control inflation. After hitting 9%, a more than four-decade high, last summer, inflation in the US has dropped recently but is still well above the Fed’s 2% target.
The Fed’s monetary policy tightening campaign started in March 2022 and so far this central bank has had 9 consecutive interest rate hikes, with a total increase of 4.75%, bringing the basic interest rate to VND. USD to the highest level in nearly 16 years. Still, Fed officials say inflation remains too high and demand further rate hikes.
Recently, the US economy was affected by the banking crisis, when three regional banks collapsed in March and another bank was shaken. Analysts believe that this crisis will not spread risks throughout the financial system, but will affect US economic growth in the near future because it will cause credit flows to tighten. The Fed’s continued interest rate hikes and credit tightening are expected to be the factors pushing the US economy into recession this year.
However, consumption in the US economy has remained strong and is expected to be maintained thanks to the large amount of savings of the people. Along with that, the strong job market, with the unemployment rate currently at 3.5%, is another important factor supporting growth. Therefore, if the US economy falls into a recession, it will most likely be a short and shallow recession.
According to VnEconomy.vn
