https://www.nytimes.com/2024/04/25/business/economy/us-economy-gdp-growth.html
The NY Times article on the U.S. economy in the first quarter of 2024 highlights several critical aspects of economic performance. Notably, the U.S. gross domestic product (GDP), adjusted for inflation, grew at a 1.6% annual rate during this period, marking a significant slowdown from the 3.4% growth rate recorded at the end of 2023 and falling below forecasters' expectations. This slowdown was largely attributed to shifts in business inventories and international trade, which are known to fluctuate. However, underlying demand indicators remained strong, suggesting a resilient economy.
A key concern emerging from the quarter's data is the acceleration of inflation. Consumer prices increased at a 3.4% annual rate, a substantial rise from 1.8% in the previous quarter, with core inflation (excluding food and energy) climbing to 3.7%. This acceleration indicates that inflation remains a persistent issue, complicating the Federal Reserve's efforts to stabilize prices.
The persistent inflation is likely to influence the Fed's monetary policy, with expectations now leaning towards maintaining or even increasing interest rates rather than cutting them. This scenario suggests a challenging period ahead as the Fed navigates high inflation and its impact on economic stability and consumer spending, which remains robust particularly among higher income groups despite broader financial strains across the economy.
One thing I find interesting is that in class we talk about how it is hard to kickstart inflation, but we are seeing now how it is also very difficult to make it slow.
ReplyDeleteTo me this indicated that the first quarter of 2024 underscores the delicate balance between economic growth and inflation control. Despite resilient demand, rising inflation pressures may cause the Fed to adjust its monetary policy, potentially impacting both economic stability and consumer behavior in the near future.
ReplyDeleteAs a college student, its quite scary to see how large inflation is becoming. It feels like I can't keep up to pay for tuition because the money I earned last summer already has decreased in purchasing power. We saw the university increase tuition for next year by about 3%, and its worrying to think about a 3% yearly increase becoming the standard.
ReplyDeleteI also did an article about the GDP and inflation, it is quite scary to see the numbers not going in our favor, especially since economist expect a recession in the coming year. I also don't like how housing inflation continues to go up, as that could affect college students in the future.
ReplyDeleteHow do you think the Federal Reserve might respond to the combination of slowed economic growth and accelerated inflation in the first quarter of 2024?
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