US economy slows in first quarter, but no recession yet

The US economy slowed sharply from January to March to reflect just 1.1% annual growth, despite an increase in consumer spending, but is expected to slow further as interest rate increases hit mortgages. and inventories.

The figures released this Thursday by the Commerce Department show that the gross domestic product fell after growing 3.2% from July to September and 2.6% from October to December 2022.

Despite the results, which largely reflected less business investment in inventories, the Federal Reserve is expected to raise interest rates another 0.25% next week. The Fed has increased the interest rate since last March from almost zero to the current 4.75%-5.00%.

However, consumer spending, which makes up about 70% of US economic activity, remained strong in the first quarter, growing 3.7% annualized, its fastest partial acceleration in almost two years.

Although the economy was not in a recession in the last quarter, a recession is expected sometime this year. The Fed continues to battle inflation that, despite falling from four-decade highs last year, is still far from the central bank’s 2% target.

Many economists see the cumulative impact of the Fed’s rate hikes still at full extent and some doubt that the central bank’s expectations of a soft landing (cooling growth enough to reduce inflation without a recession) ) are not realistic.

For now, the housing market, highly vulnerable to high interest rates, has suffered from the measures, while many banks have tightened their borrowing requirements since the failure of two banks last month.

In another report Thursday from the Labor Department, claims for unemployment benefits fell by 16,000 to 230,000 in the week ending April 22.

Claims for jobless benefits have risen since March, but not to a level that could ring alarm bells about the labor market, but reduced access to credit for businesses and households is perceived to be affecting demand and could dent markets. jobs.

[Con información de AP y Reuters]

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