June 3, 2024 — US Q1 GDP Revised Down


A downgrade of first-quarter economic growth was announced last week. The US GDP grew at an annualized 1.3 percent in Q1 2024, below initial estimates of 1.6 percent, and well below the 3.4 percent growth in the fourth quarter of 2023. The downward revision is the lowest quarterly growth number since Q2 2022, when the economy contracted. The Fed targets a 1.8 percent GDP growth rate as non-inflationary.

The softness in the GDP growth is raising hopes the Fed will be on track to start cutting rates before the end of the year. Consumer spending has weakened to a 2 percent annualized rate, and the trade deficit has widened. Though the labor market remains strong.

Traders are now pricing in a 53 percent chance of a first rate cut in September. Others believe no cuts will happen in 2024 due to persistent inflation, a resilient economy and a robust labor market; they believe the conditions are expected to persist through the end of the year.