The May edition of NRF’s Monthly Economic Review revealed that the U.S. economy’s gross domestic product (GDP) growth rate remained at 1.6% in the first three months (first quarter) of this year. This is less than half of the 3.4% seen in Q4 2023 and the lowest level since 2023. In the second quarter of last year, it was 2.1%.
Jack Kleinhenz, chief economist at NRF, said that although U.S. economic growth slowed in the first quarter, consumers were still spending more than last year.
“Although there are signs that expansion is slowing, the economy remains resilient, driven by a strong job market and continued spending by consumers and businesses,” he added.
Kleinhenz also noted that although progress has been made in inflation since its peak in 2022, it has persisted for longer than expected.
Year-over-year inflation, driven primarily by service prices, rose to 3.4% in the first quarter, compared to 1.8% in the previous quarter, according to the Personal Consumption Expenditure Price Index and the Federal Reserve .
NRF emphasized that despite continued cost pressures, consumers remain willing to spend on both goods and services.
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Consumer spending growth slowed from 3.3% in the fourth quarter, but was still up 2.5% year-on-year in the first quarter. The U.S. Census Bureau also reported that total retail sales were stronger than expected in March, increasing 4% year-over-year, compared with February’s 2.1% increase.
NRF believes the economic indicators “indicate that the overall U.S. economy remains in very good shape” with a strong labor market, “robust” job growth, and rising wages.
The report said higher wages support workers’ ability and willingness to spend, but are unwelcome news for Fed officials trying to rein in inflationary pressures.
The Fed last week kept interest rates on hold, citing high inflation, and the NRF indicated that a rate cut scheduled for June would likely be postponed.
“With the labor market still rebalancing, economic growth remaining stable, and financial conditions accommodating, we expect the Fed will likely postpone its rate cut decision for some time,” Kleinhenz said. ” he said.
Kleinhenz said last month (April) that he expected the U.S. economy to remain strong this year, despite slowing growth in both gross domestic product (GDP) and retail sales.