US economic growth slows to 1.6pc in 1Q

The US economy in the first quarter grew at a 1.6pc annual pace, slower than expected, while a key measure of inflation accelerated.

Growth in gross domestic product (GDP) slowed from a 3.4pc annual rate in the fourth quarter, the Bureau of Economic Analysis (BEA) reported on Thursday. The first-quarter growth number, the first of three estimates for the period, compares with analyst forecasts of about a 2.5pc gain.

Personal consumption slowed to a 2.5pc annual rate in the first quarter from a 3.3pc pace in the fourth quarter, partly reflecting lower spending on motor vehicles and gasoline and other energy goods. Gross private domestic investment rose by 3.2pc, with residential spending up 13.9pc after a 2.8pc expansion in the fourth quarter. Government spending growth slowed to 1.2pc from 4.6pc. Private inventories fell and imports rose, weighing on growth.

The core personal consumption expenditures (PCE) price index, which the Federal Reserve closely follows, rose by 3.7pc following 2pc annual growth in the fourth quarter, although consultancy Pantheon Macroeconomics said revisions to the data should pull the index lower in coming months.

The Federal Reserve is widely expected to begin cutting its target lending rate in September following sharp increases in 2022 and early 2023 to fight inflation that surged to a high of 9.1pc in June 2022.

By Bob Willis