US economic growth is weaker than expected

US economic growth is weaker than expected

Growth in the world’s largest economy reached 1.6 percent, up from 3.4 percent in the fourth quarter. This is an annual number. This means that growth is artificially extended from quarter to quarter as if it remained at this level for a whole year. Under the method used in Europe, growth in the United States would have been 0.4 percent in the first quarter.

On average, economists expected an increase of 2.5%. Economic growth is important to the US Federal Reserve’s interest rate policy. If the economy slows sharply, the central bank may be more inclined to cut interest rates to stimulate the economy. With strong growth, the Fed can keep interest rates at a high level for longer.

Interest rate cuts are coming

The slowdown in growth is partly linked to weak consumer spending, the engine of the US economy, and also weak exports. The US government will later release new estimates for growth in the first quarter.

In financial markets, the Fed is expected to make its first interest rate cut later this year, possibly in September, after inflation begins to decline.

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