A Thursday U.S. Commerce Department report delivered a double dose of disappointing economic data with findings showing overall economic growth slowed more than expected in the first quarter of the year and inflation made another surprisingly robust uptick.
Real gross domestic product increased at an annual rate of 1.6% in the first quarter of 2024, according to the “advance” estimate released by the Bureau of Economic Analysis, a decline from 2023′s fourth quarter real GDP growth rate of 3.4%.
Alongside the first quarter GDP measure, which fell well short of the 2.4% most economists were expecting, the personal consumption expenditures price index increased 3.4% over the period, compared with an increase of 1.8% in the last quarter of 2023. Excluding food and energy prices, the PCE price index increased 3.7% in the first three months of 2024 compared with the 2% increase to close out last year.
“This was a worst of both worlds report — slower than expected growth, higher than expected inflation,” David Donabedian, chief investment officer of CIBC Private Wealth US, told CNBC. “We are not far from all rate cuts being backed out of investor expectations. It forces (Fed Chair Jerome) Powell into a hawkish tone for next week’s (Federal Open Market Committee) meeting.”