The much-announced recession in the United States has yet to arrive, but the economy is already cooling down. Economic growth data released on Thursday by the Department of Commerce’s Bureau of Economic Analysis shows that U.S. gross domestic product (GDP) increased at an annual rate of 1.3% in the first quarter of the year. That is equivalent to a non-annualized quarterly rate of 0.3%.
The number represents an upward revision from a previous estimate of 1.1% released a few weeks ago. Growth is clearly under the 2.6% annual rate with which 2022 ended, equivalent to a quarterly rate of 0.7%, but it represents the third consecutive expansion for the economy. Activity contracted in the first two quarters of 2022, due to extraordinary factors largely tied to international trade and trimmed inventories that, in principle, make it impossible to talk about a recession.
From January to March, The increase in real GDP reflected increases in consumer spending, exports, federal government spending, state and local government spending, and non-residential fixed investment that were partly offset by decreases in private inventory investment and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased, said the Bureau of Economic Analysis.
Interest rates are mostly holding back the construction sector, which is very sensitive to the price of money. Other sectors are seeing their activity slow down amid more restrictive financial conditions as well as inflation that is eroding consumers’ purchasing power. The labor market, however, remains very strong, with the unemployment rate at 3.4%, its lowest in more than half a century.
The Federal Reserve expects the U.S. economy to enter a recession at the end of this year, according to the minutes of its last meeting, released this Wednesday, which assumed that “the effects of the expected further tightening in bank credit conditions, amid already tight financial conditions, would lead to a mild recession starting later this year, followed by a moderately paced recovery.“
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