Revised GDP Figures Show U.S. Economy Grew More Than Expected in Q1 — May Be a Headache for the Fed
Key takeaways
- U.S. GDP growth was at 2% between January and March instead of the 1.3% first predicted
- New data revealed far fewer layoffs than predicted, pointing to increasingly resilient labor market
- Core PCE prices saw a small downward revision to 4.9%, indicating battle against sticky inflation is slowly being won
Economists, analysts and Wall Street alike have been watching the economic data like hawks to see if there’s any news of a full-on recession. But this week we saw a surprise lift in the U.S. economy’s growth, which has further allayed fears and made the fabled ‘soft landing’ the Fed is after that bit closer. Keep reading.
The economy might be more resilient than expected in the wake of higher interest rates — but so is inflation. Consider using Q.ai’s Inflation Protection Kit as a tool to defend your investments. Harnessing the power of AI, it mines the weekly data to predict which assets — like TIPS, precious metals, and commodities — could stand up to inflation and deliver returns, taking the weight off your shoulders.
Download Q.ai today for access to AI-powered investment strategies.
What are the latest GDP figures?
In a surprise result for the strength of the U.S. economy, gross domestic product (GDP) was actually 2% and not the 1.3% first reported. Given the previous quarter showed a 2.6% growth rate, it’s another sign that the U.S. might avoid a recession.
Apparently, the revision is from stronger-than-expected consumer spending, a continuously buoyant labor market and strong exports. The latest personal consumption expenditures (PCI) report revealed consumer spending rose 4.2% for the quarter, while exports increased 7.8%. Layoffs are also coming in far below expectation, another economic boost.
What does it mean for the economy?
While on the face of it, increased consumer spending and a resilient jobs market is all good news, it depends on how it affects inflation. Thankfully, there’s also been a sliver of good news on that front. Core PCE prices rose 4.9% in the quarter, which is a small 0.1% downward revision. It’s still far from the 2% target the Fed wants to hit, but progress is progress.
The resilient labor market can be a problem when wages grow to keep up with inflation, making getting it down much harder. The Fed hasn’t ruled out further rate hikes this year to finish the job, though all signs are pointing in the right direction at present.
The bottom line
The U.S. economy is in better shape than initially thought, which is good news for those hoping to hear we can avoid a recession. While that does look increasingly possible, things can turn at any moment thanks to the numerous plates spinning in the air. Investors should always aim for a diversified portfolio in case it all comes crashing down.
The Fed doesn’t think inflation will come down any time soon, but you can harness its strength with Q.ai’s Inflation Protection Kit. The AI algorithm scans through the weekly data, predicting which assets — from TIPS to precious metals and commodities — could offer inflation protection and potential returns to help you build wealth.
Download Q.ai today for access to AI-powered investment strategies.
