The United States has seen a considerable decline in its economic growth, with the first quarter of 2023 recording a 1.1% annualized rate, according to the Bureau of Economic Analysis.
This marks a significant slowdown in comparison to the previous quarters, as the country continues to face challenges while recovering from the pandemic recession.
In Q4 2022, the growth rate was 2.6%, while in Q3 2022, it reached 3.2%.
Despite a 3.7% increase in consumer spending in the first quarter, business investment and inventories exhibited weakness, suggesting that businesses may have anticipated a reduced level of consumer spending.
“Consumer spending is still moving up, but I don’t know how long that can last,” said economist at S&P Global Market Intelligence Ben Herzon. “Confidence is weak and has been weakening. You’ve got to wonder, will that soon translate into a pullback in spending?”
The GDP growth was also driven by increases in exports, nonresidential investment, and government spending, but was hindered by decreases in private inventory investment, residential investment, and imports.
GDP growth is expected to slow down further in the second quarter, with analysts forecasting a likely recession this year.
Chief economist for Wells Fargo Jay Bryson said, “If we do have a shock, if we do have a debt ceiling debacle or something like that, that raises the probability in my mind that we go into a recession.”
Inflationary pressures have persisted due to supply chain bottlenecks and labor shortages, leading to increased expenses and diminished purchasing power for both consumers and businesses.
Last month, inflation reached 5.0%, as reported by the Bureau of Labor Statistics.
This is comparatively lower than the 9.1% rate seen last summer, but prices for many items continue to remain high, with wage increases failing to match the price levels.
Real disposable personal income increased by 8.0% in Q1 2023, compared to a 5.0% increase in Q4 2022.
Concurrently, the personal saving rate experienced a 4.8% rise in Q1 2023, up from a 4.0% increase in the previous quarter.