U.S. economic growth was much weaker than expected at the start of the year and prices rose at a faster pace, the Commerce Department said Thursday.
According to the department’s Bureau of Economic Analysis, gross domestic product, a broad measure of the goods and services produced from January through March, rose 1.6% annually, adjusted for seasonality and inflation.
Economists consulted by Dow Jones expected an increase of 2.4%, after a gain of 3.4% in the fourth quarter of 2023 and 4.9% in the previous period.
Consumer spending rose 2.5% in the period, up from 3.3% in the fourth quarter. Fixed asset investment and government spending at the state and local level helped keep GDP positive this quarter, while a decline in private inventory investment and an increase in imports negatively affected it.
There was also bad news on the inflation front.
The personal consumer expenditures price index, a key inflation variable for the Federal Reserve, rose 3.4% this quarter, the biggest gain in a year. Excluding food and energy, core PCE prices rose 3.7%, well above the Fed’s 2% target. Central bank officials tend to focus on core inflation as a better indicator of long-term trends.
The GDP price index, also called the “chain-weighted” price index, rose 3.1%, compared with the Dow Jones estimate of a 3% increase.
Markets slumped after the news, with futures tied to the Dow Jones Industrial Average falling more than 400 points. Government bond yields rose, with the 10-year benchmark recently at 4.69%.
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