US first quarter GDP expands 1.6%

The news: The US economy grew at its slowest pace in nearly two years in the first quarter amid a surge in imports and small build-up of unsold goods at businesses.

The numbers: US GDP increased at a 1.6% annualised rate last quarter, the slowest pace since the second quarter of 2022, the Commerce Department's Bureau of Economic Analysis said. Economists polled by Reuters had forecast GDP would rise at a 2.4% rate.

The context: The cooler-than-expected growth reported by the Commerce Department, which also reflected a downshift in government spending, exaggerated the moderation in economic activity. Domestic demand, a better growth measure, was strong as consumer spending moderated slightly while business investment picked up and the housing recovery gained steam. It reinforced expectations the Federal Reserve would not cut interest rates before September, sending stock markets lower. The US economy, which has outperformed the economies of other advanced nations, is being supported by a resilient labour market.

What they said: "The Fed will likely see the GDP report as solid, while the upward surprise to inflation will support the central bank's case for waiting longer before cutting rates," Daniel Vernazza, chief international economist at UniCredit told Reuters.