The US economy grew at a slower-than-expected pace in the first quarter of 2024, with the gross domestic product (GDP) increasing at an annualized rate of 1.6%, falling short of the projected 2.2%. The lackluster growth was primarily attributed to a significant slowdown in consumer spending and reduced federal government spending.
US GDP Grew Slower than Expected in Q1 2024
The GDP report revealed that businesses reduced their inventories, which detracted approximately 0.9 percentage points from the overall growth rate. The gap between exports and imports also widened, with imports increasing and exports slightly declining.
While business investments, particularly in equipment and intellectual property, showed modest growth, it was not enough to offset the negative impacts from other sectors. Residential fixed investment, however, did increase, providing a small counterbalance to the broader economic slowdown. Local and state government spending was mildly up, contrasting with the federal spending cuts.
Economists have expressed concern about the sustainability of economic growth, given the current high interest rates and ongoing global economic uncertainties. The latest GDP report raises questions about the resilience of the US economy and its ability to maintain a steady growth trajectory in the face of these challenges.
US Indices Slide, VIX Shoots Up
Following the release of the GDP data, major US stock indices experienced a significant downturn. At the time of writing, the S&P 500 traded at 5,010.67, down by 60.96 points or 1.20%, while the Dow Jones Industrial Average fell by 606.01 points or 1.58% to 37,854.91.
The tech-heavy Nasdaq Composite also suffered, trading at 15,458.22, down 254.53 points or 1.62%. The Russell 2000, which tracks small-cap stocks, declined by 29.34 points or 1.47% to 1,966.09.
The market’s adverse reaction to the GDP report was further reflected in the CBOE Volatility Index, which rose by 0.82 points or 5.13%, indicating heightened market volatility. The Federal Reserve’s response to these economic developments will be critical in shaping market sentiment in the coming weeks and months.
Do you think the US economy will rebound or cool down over the rest of the year? Let us know in the comments below.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
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