The U.S. economy slowed down at the beginning of 2023. This suggests that the Federal Reserve’s aggressive run of interest rate hikes has slowed down business activity, even though the stock market and job market have been doing well.
The U.S. gross domestic product grew at an annualized rate of 1.1% from January to March, according to statistics released by the government on Thursday. The figures showed that growth had slowed from 2.6% in the last quarter. In turn, this showed a change from the 3.2% rise seen in the previous quarter.
A government body called the Bureau of Economic Analysis said that consumer spending, which makes up about two-thirds of the U.S. economy, jumped in the first three months of this year.
The growth was also helped by federal and state government spending, the agency said.
But the slowdown from the last quarter was caused by a drop in business investment and domestic fixed investment, which includes money spent on buying homes and building them.
The data gives a snapshot of how the economy was doing during a time when jobs were plentiful but banks collapsed on a scale not seen since the 2008 financial crisis.
The measure, which has been talked about for a long time, comes at a tough time for the U.S. economy.
In the last year, the Fed has raised interest rates, which had not happened since the 1980s.
The goal of the strategy is to cut inflation, but it could slow the economy and cause a recession.
So far, this method has worked to slow price increases, but it hasn’t helped the Fed reach its goal.
Last month, consumer prices were 5% higher than they were a year ago. This continued a slowdown in price increases that has been going on for a few months, but inflation is still more than double the goal rate of 2%.
Several other measures show that the economy is still doing well, but it has slowed down in recent months.
According to government figures released last week, the U.S. added 236,000 jobs in March. This is strong job growth, but it is less than the average of 334,000 jobs added each month in the six months before March.
Also, U.S. store sales dropped slightly in February but stayed strong, which suggests that people still have some savings from the pandemic.
Still, a recession is still a risk for the economy.
Central bank meeting minutes show that Fed experts said in March that they expect a “mild” recession later this year. This is worse than what they had said before.
A Bloomberg poll from last month found that 65 percent of economists think there will be a recession in the next year.
Many people use the shorthand measure of two straight quarters of falling GDP (GDP adjusted for inflation) to define a recession.
The National Bureau of Economic Research (NBER), a research group that is seen as an expert on measuring economic performance, uses a more complicated definition that takes into account several indicators that must show “a significant decline in economic activity spread across the economy that lasts more than a few months.”
Since the NBER is the main authority on the subject, this definition is used to decide if a downturn is a recession.
