The Bureau of Economic Analysis released the data for the macroeconomy. The data indicate that growth in the United States slowed considerably during the first quarter of 2023 as interest rate increases and inflation took hold of an economy largely expected to decelerate even further ahead. Gross domestic product, a measure of all goods and services produced for the period rose at a 1.1% annualized pace. While this growth remains positive, it is nonetheless slower than the previous quarters. In the third and fourth quarters, U.S. GDP rose 2.6% and 2.1%, respectively.
Real GDP-Q1 2023
Source: U.S. Bureau of Economic Analysis
According to the U.S. Bureau of Economic Analysis, the increase in real GDP reflected increases in consumer spending, exports, federal government spending, state, and local government spending, and nonresidential fixed investment that were partly offset by decreases in private inventory investment and residential fixed investment. The U.S. Bureau of Economic Analysis maintains that the increase in consumer spending reflected increases in both goods and services. Within goods, the leading contributor was motor vehicles and parts. Within services, the increase was led by healthcare and food services, and accommodations. Within exports, an increase in goods (led by consumer goods, except food and automotive) was partly offset by a decrease in services (led by transport). Within federal government spending, the increase was led by non-defense spending. The increase in state and local government spending primarily reflected an increase in compensation of state and local government employees. Within nonresidential fixed investment, increases in structures and intellectual property products were partly offset by a decrease in equipment. The U.S. Bureau of Economic Analysis further argued that compared to the fourth quarter, the deceleration in real GDP in the first quarter of 2023 reflected a downturn in private inventory investment and a slowdown in nonresidential fixed investment. These movements were partly offset by an acceleration in consumer spending, an upturn in exports, and a smaller decrease in residential fixed investment.
Current-dollar personal income increased $278.9 billion in the first quarter, compared with an increase of $398.8 billion in the fourth quarter. The increase in the first quarter primarily reflected increases in compensation and government social benefits. Disposable income also increased $571.2 billion (12.5%) in the first quarter, compared with an increase of $403 billion (8.9%) in the fourth quarter. The increase in the first quarter reflected an increase in personal income and a decrease in personal current taxes.
It is important to assert that retail sales in March came in lower than expected, and executives have recently said on earning calls they are starting to see similar data play out within their business. John Leer, Chief Economist at Morning Consult said: “The consumer ended the quarter on a sour note, calling into question the sustainability of economic growth moving forward. While private investment may pick back later this year, it tends to be highly volatile from quarter to quarter. Without a robust consumer, we are likely to see more volatility and uncertainty in economic activity through the end of the year.” The report comes as the Federal Reserve is seeking to slow an economy burdened by inflation that had been running at its highest level in more than 40 years.