The USA's Economy Shows A 1.6% Growth Rate In 1st Quarter Of The Financial 2024.

Introduction : Dip in the USA’s economy

The US government is seeing a dip in the USA’s economy in the first quarter of the financial year of 2024. The economy slowed down more than expected this year, even though people were spending money and building homes. But other sectors of the economy, such as businesses stocking up on goods and selling things to other countries, did not meet expectations.

The economy (GDP) expanded at a seasonally adjusted annual rate of 1.6% in the 1st quarter or January-March period, the Commerce Department said Thursday. That’s a major downfall from the strong growth of 4.1% in the second half of last year and below the healthy 2.5% gain projected by economists.

It has been predicted since late 2022 about the sharp decline in growth rates in upcoming years. Even it is predicted that the US economy may go to recession, but it kept growing. The Federal Reserve of US, which helps manage the economy, increased interest rates to control inflation or rising prices, but it didn’t slow down the economy drastically like people thought it would.

Now, some experts think that because the economy didn’t grow as expected in the last quarter, the government might lower interest rates to help boost things. But others still think that the economy is still not that stable and will keep slowing down, especially because prices of day-to-day things are going up faster than usual. Fed officials stated that they’re in no rush to cut rates following an acceleration in consumer prices the first three months of the year.

As of late March, the Federal Reserve (the Fed) assumed that they may lower interest rates three times in 2024 because inflation, or the rising prices of things, was starting to slow down. Inflation had been very high, the highest it’s been in 40 years, reaching 9.1% in the middle of 2022. But by March 2024, it had lowered to about 3%, which was seen as a good sign.

However, in March, when the Consumer Price Index (CPI) report came out, it showed that prices were still increasing. In fact, for the third time in a row, prices had gone up, leaving inflation at 3.5%. This is higher than what the Fed assumed, which is around 2%. So, because prices were still going up more than expected, the Fed might not lower interest rates like they initially considered they would.

Some experts think that the report released on Thursday, which showed the underperformance of the US economy, means that the US economy might start slowing down. Also, if inflation, or the rise in prices, slows down very quickly, the Federal Reserve might decide to lower interest rates several times. Another report coming out on Friday is expected to show that inflation is not rising as fast, at around 2.6%. Because of this, the markets where people bet on future events now predict that the Federal Reserve will lower interest rates two times in the financial year 2024.

Is a recession possible in the USA in 2024?

There is no chance that the US will go into a recession in 2024, but exceptions can happen. Before the recent report, experts predicted that the country’s economy would likely grow by a decent 2.4% this financial year of 2024. Also, in a survey conducted by Wolters Kluwer Blue Chip Economic Advisors in early April, they found that the chances of a recession happening have dropped from 60% last May to only 30% now. So, things are not in that much worried situation; positivity is maintained, but fewer sections of people are still worried about a recession happening this year.

Is the amount of money customers are spending increasing?

Yes, consumer spending is increasing. Consumer spending is a very crucial and important factor for the economy of a country because it makes up to 70% of all economic activity. Recently, consumer spending grew by a strong 2.5% at the beginning of this year, following a 3.3% increase in the fourth quarter of last financial year.

The increase in spending was mainly because people spent more on healthcare and financial services. However, purchases of goods like cars and gasoline actually went down.

Surprisingly, despite the pandemic, people have been spending more money lately. This surprised some experts because many people have spent pandemic-related savings, especially those with lower and middle incomes. Also, credit card debt is at a record high, and there are more people than usual who are late on their payments.

However, because of the demand for more employable people in the market, with an average of 276,000 jobs added each month this year, people have more money to spend. Even though wages are not growing as fast as before, they still increased by 4.7% compared to last year, according to a tracker by the Atlanta Federal Reserve. This means that many Americans have more money to spend, especially since their pay increases are higher than the rise in prices.

US stock market status?

The US stock market is not looking so strong before its opening. The value of futures contracts tied to major indexes like the Dow Jones Industrial Average and the S&P 500 has dropped by 1.1% just before 9 a.m. Eastern Time. Additionally, the yields on Treasury bonds, which move in the opposite direction of bond prices, have gone up. Overall, this suggests that investors are feeling a bit cautious or uncertain at the moment.

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