First quarter US economic growth falls short of expectations, reaching only 1.6%

The US economy grew less than expected in the first quarter of 2024, with a disappointing annualized rate of 1.6 percent, according to data released by the Bureau of Economic Analysis. This figure fell short of analysts’ expectations of a 2.5 percent increase and was a significant drop from the revised rate of 3.4 percent in the previous quarter.

However, the real shock came from the inflation data, which was higher than forecasted. This unexpected rise in prices has raised doubts about the possibility of US Federal Reserve rate cuts in the near future. Sameer Samana, senior global market strategist at Wells Fargo, described the situation as “almost stagflationary,” with slowing growth but stubbornly high prices.

Following the release of the data, US stock futures plummeted and government bonds faced pressure. Contracts tracking the S&P 500 initially dropped by 1 percent, while yields on two-year US Treasuries rose by 0.05 percentage points to 4.99 percent.

The strong performance of the US economy in recent weeks has surprised investors, leading to a delay in expectations for interest rate cuts and strengthening the dollar while impacting global equities. Despite President Joe Biden’s hopes that the robust economy would boost his chances in the upcoming election, borrowing costs remain at a 23-year high. Traders are now adjusting their expectations for Fed rate cuts due to persistent inflation.

As this story continues to develop, the future of the US economy remains uncertain, with potential implications for both domestic and global markets.