By Lucia Mutikani
WASHINGTON (Reuters) – U.S. economic growth likely slowed to a still solid pace in the first quarter while accelerating, reinforcing financial market expectations that the rate cut will be delayed until September.
The Commerce Department’s first-quarter report, due out Thursday, is expected to show that consumers are still doing the heavy lifting for the economy, thanks to a resilient job market.
The economy has been defying prophecies of doom since late 2022 following the US central bank’s aggressive rate hike campaign to eliminate inflation.
The United States is outperforming other advanced economies. Consumers secured lower mortgage rates while businesses refinanced debt before the tightening cycle began, economists say.
Companies are also stockpiling workers after facing difficulties finding labor during and after the Covid-19 pandemic, and are enjoying greater earnings due to strong pricing power.
“They have remained relatively insulated from interest rate rises,” said Richard de Chazal, an analyst at William Blair. “In previous economic cycles, at the first sign of an economic slowdown, U.S. companies used to lay off workers very quickly and knew they could rehire them very quickly when the cycle turned.”
GDP likely grew at an annualized rate of 2.4% last quarter, according to a Reuters poll of economists. Estimates ranged from a 1.0% pace to a 3.1% rate. The economy grew 3.4% in the fourth quarter.
Third-party advertising. It is not an offer or recommendation from Investing.com. Read our guidelines here or
remove ads
.
It is expanding at a pace above what Fed officials consider the non-inflationary growth rate of 1.8%. Last week, the International Monetary Fund raised its forecast for U.S. growth in 2024 to 2.7%, compared with the 2.1% projected in January, citing stronger-than-expected jobs and consumer spending.
Job gains in the first quarter averaged 276,000 per month, compared with the October-December quarter’s average of 212,000.
Low layoffs are keeping wage growth high, supporting consumer spending, which accounts for more than two-thirds of economic activity.
Although inflation has likely increased, with the price index, excluding food and energy, forecast to have risen 3.4% from 2.0% in the fourth quarter, economists are not worried about a resurgence in price pressures. .
The is one of the inflation measures monitored by the Fed for its 2% target. The central bank has kept the interest rate in the range of 5.25% to 5.50% since July, following a total increase of 525 basis points since March 2022.
