MAY 1, 2023 – GDP UP 1.1 PERCENT, PCE UP 4.2 PERCENT AHEAD OF FED MEETING
US GDP grew at an annualized rate of 1.1 percent for the first quarter of 2023, less than half of the 2.6 percent seen in the fourth quarter of 2022. Analysts had been expecting GDP growth of 2 percent. Consumer prices rose slightly last month, with the personal consumption index (PCE) up 4.2 percent, above expectations of 3.7 percent, showing consumers have kept spending despite higher prices.
Inflation has cooled due to rising interest rates and the Fed’s quantitative tightening, resulting in a slowing of the economy. A mild recession is anticipated to occur later this year. Recent failures in the banking sector are expected to further affect the economy later this year. The job market remains a bright point with unemployment at 3.5 percent, which may ease the effects of the recession.
The Fed meets mid-week to discuss policy and is expected to raise rates by 0.25 percent. Even though inflation has pulled back, it is still running well above the Fed’s 2 percent target. The benchmark interest rate stands at 4.75 percent, the highest level in nearly 16 years.