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SALT LAKE CITY — 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 personal consumption expenditures 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."
Bureau analysts said the nominal real GDP growth primarily reflected increases in consumer spending, residential and nonresidential fixed investment and state and local government spending.
The increase in consumer spending was driven by bigger outlays on services over goods and particularly, according to the report, on health care, financial services and insurance.
The Fed began the year signaling 2024 was likely to see a series of downward adjustments to its federal funds rate, but earlier this month, Powell said persistent inflation and other muted economic indicators could push out any decisions to make cuts to its benchmark rate, which continues to stand in the 5.25% to 5.5% range, the highest in over 20 years.
"Recent data have clearly not given us greater confidence" that inflation is coming fully under control and "instead indicate that it's likely to take longer than expected to achieve that confidence," Powell said during a panel discussion at the Wilson Center, per the Associated Press.
"If higher inflation does persist," he said, "we can maintain the current level of (interest rates) for as long as needed."
Expecting the worst
Earlier this year, Utahns registered their collective pessimism over what direction the economy will be headed in 2024.
When asked, "Looking ahead, how are you feeling about the economy in the coming year?" in a statewide poll conducted in late January by the Deseret News in partnership with the Hinckley Institute of Politics, 52% of respondents said they were somewhat or very pessimistic, 43% reported being somewhat or very optimistic and 6% said they didn't know.
And in a follow-up question asking poll participants how concerned they currently were about inflation, 87% said they were somewhat or very concerned, 11% said they were not very or not at all concerned and 2% weren't sure about their feelings.
Republican poll participants were less optimistic than Democrats in their feelings about the economy in the coming year, 39% to 54%, respectively, and more concerned about inflation, 89% to 77%.
In the poll, respondents with lower incomes were more down on the economic outlook than those with higher incomes. Younger residents, too, expressed more pessimism than older residents.
