Economic data for the first quarter of 2024, recently released by the U.S. Department of Commerce, showed that U.S. real gross domestic product (GDP) growth rate was 1.6 percent, far below market expectations of 2.5 percent and 3.4 percent in the previous quarter, marking a significant slowdown in U.S. economic growth. This growth rate is the lowest since the second quarter of 2022, triggering widespread attention from the market to U.S. economic prospects.

Specifically, personal consumption spending, which accounts for about 70 percent of the total U.S. economy, grew by only 2.5 percent, down 0.8 percentage points compared to the increase in the fourth quarter last year. Commodity spending even fell by 0.4 percent. Non-residential fixed asset investment also slowed, rising from 3.7 percent in the fourth quarter last year to 2.9 percent in this quarter. These data show that weakening domestic demand is one of the main reasons for economic growth slowing.

In addition, inflation in the U.S. is also worthy of attention. According to the Individual Consumer Expenditure (PCE) Price Index, the first quarter inflation rate was 3.4%, far higher than the previous quarter’s 1.8%. The core PCE price index, the Fed’s most concerned inflation indicator, rose from 2% in the previous quarter to 3.7%, almost twice as much as the market expected.

This recovery in inflation means that despite the Federal Reserve’s policy of austerity, the inflationary pressure remains high. The market is generally expected that the Federal Reserve may be delayed until the end of the year before it starts to lower interest rates, which has led to turbulence in the stock and bond markets.

In terms of foreign trade, the report noted that the delay in international trade in U.S. economic growth was evident. The negative contribution of net exports to GDP growth reached 0.86 percentage points, in sharp contrast to the previous quarter, when net exports also contributed to economic growth. Analysts noted that this was mainly due to the influence of strong U.S. dollars, which caused U.S. products to decline in competitiveness in international markets, weak export growth, while imports increased, leading to the expansion of trade deficits.

The strength of the dollar index not only makes imports relatively inexpensive, leading consumers and to purchase more goods from abroad, but also increases the cost of U.S. exports, affecting export competitiveness.This has already begun to appear in this years trade data and the trade deficit in February has reached $68.9 billion.

For the future of the U.S. economy, some economists say that inflation is expected to slow down over the course of the year as total demand slows down, but there is still a long way to go from the Feds 2% target. Economist Felix Schmidt of the Bank of Belemberg noted that weak export growth is directly linked to weakening global demand and strong U.S. dollars, while strong import growth also reflects the health of the U.S. economy to some extent.