President Joe Biden has been roundly criticized for his handling of the economy, which has seen record inflation and stubbornly high prices, and a new report won’t do him any favors regarding reelection.
The U.S. economy expanded less than previously estimated in the first quarter of 2024 due to a slowdown in consumer spending, as reported by the Bureau of Economic Analysis (BEA) on Thursday.
The U.S. economy’s growth in the first quarter was revised downward from an initial 1.6% to 1.3% year-over-year, indicating weaker economic strength than initially estimated, according to the Bureau of Economic Analysis (BEA). This revised figure falls short of the 2.2% growth economists had expected, contrasting with the stronger growth rates of 4.9% and 3.4% seen in the third and fourth quarters of 2023, respectively.
The revision of GDP growth for the first quarter from 1.6% to 1.3% was influenced by newly available data showing lower than initially estimated consumer spending, private inventory investment, and federal government spending. Conversely, spending by state and local governments, as well as nonresidential and residential fixed investment and exports, were slightly higher than first reported. Additionally, the current-dollar GDP was revised down to 4.3% from 4.8%, and the real gross domestic income was initially estimated at just 1.5%, according to the Bureau of Economic Analysis (BEA).
Disappointing GDP reports have raised concerns that the economy is heading towards a period of stagflation characterized by sluggish economic growth and elevated inflation. The inflation rate stood at 3.4% on a year-over-year basis in April and has consistently remained above 3% since reaching its highest point during President Joe Biden’s term at 9% in June 2022.
Federal Reserve Chair Jerome Powell countered speculation that the economy is experiencing stagflation following the Fed’s May meeting. He highlighted low unemployment rates and a deceleration in inflation as key indicators. Similarly, President Biden has sought to mitigate concerns about the economy, especially regarding inflation, attributing rising prices to corporate greed. However, the Federal Reserve Bank of San Francisco challenged this assertion by comparing historical trends.
In an effort to reduce inflation to approximately 2%, the Federal Reserve has set the federal funds rate between 5.25% and 5.50%, marking a 23-year high. This increase has pressured consumers and businesses to curtail spending. Consequently, the hike in the federal funds rate has raised the cost of credit across the board, making borrowing more expensive, including through credit cards.
“Job growth has also slowed as of late, with the U.S. adding just 175,000 nonfarm payroll jobs in April, far lower than the 242,000 that were expected, while the unemployment rate ticked up slightly to 3.9%,” The Daily Caller reported.
