The growth of the American economy slowed significantly

Growth for January to March of this year fell significantly short of analysts’ estimates. On average, they expected the growth rate to slow down to roughly 2.5 percent. However, the range of estimates was very wide, from one percent to 3.1 percent. Economic growth was mainly driven by consumer spending in the first quarter.

US stocks began to deepen losses after the news. Until recently, investors assumed that the US Central Bank (Fed) would start reducing key interest rates in the coming months, but due to the re-acceleration of inflation, they no longer expect the rate-cutting cycle to start before the end of the year.

Fed representatives consider a rate of around 1.8 percent to be growth that does not cause inflation.

The public finance deficit rose to 3.7 percent of GDP last year

Economy

Last week, the International Monetary Fund (IMF) increased its estimate of the growth of the US economy for this year to 2.7 percent from the previous estimate of 2.1 percent, which it counted on in the January forecast. The improvement is justified by the situation on the labor market and higher consumer spending. In the first quarter, the US averaged 276,000 jobs per month, compared to 212,000 per month in the fourth quarter last year.

So far, the world’s largest economy is defying gloomy forecasts. The Fed began raising interest rates in quick succession in the spring of 2022 to stem rising inflation, ending the monetary policy tightening cycle only last fall. The United States is now growing faster than other developed countries, especially those in Europe. U.S. consumers locked in lower mortgage rates for an extended period of time before the rate hikes, while businesses refinanced, according to economists.

The U.S. Labor Department said in a separate report that the number of people who filed for unemployment benefits stood at 207,000 in the week to April 20. That was better than analysts who had expected the number to be 215,000, according to Reuters.