US GDP growth slows to 1.1% in first quarter

Slowdown increases fears of a mild recession and inflation remains a stubborn problem

A residential construction project in Denver. AP
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US economic growth slowed to 1.1 per cent in the first quarter of this year, the Commerce Department said on Thursday, as the possibility of a mild recession increases.

The figure came in below economists' expectations of 2 per cent growth, while core personal consumption expenditure for the first quarter rose by 4.9 per cent, versus economists' projections of 4.7 per cent growth.

The economy grew by 2.6 per cent in the fourth quarter of last year.

The first-quarter GDP figure “reflected increases in consumer spending, exports, federal government spending,” along with some forms of investment, the Commerce Department said in a statement.

Economic activity has been easing as the US central bank has rapidly raised the benchmark lending rate to tackle stubborn inflation, while the full fallout from recent financial sector unrest — following the failures of three midsized lenders last month — has yet to be seen.

Inflation and consumer spending figures could well keep the Federal Reserve on track to raise interest rates by a quarter of a percentage point next week.

First Republic Bank’s continuing struggles, however, do raise the possibility that the central bank could pause.

“Inflation remains stubborn, and along with the continued strength in the labour market, it should keep the Fed on pace for a May and potentially a June rate hike,” said Cliff Hodge of Cornerstone Wealth.

Updated: April 28, 2023, 7:06 AM