U.S. Economic Growth Is Slowing, but Recession Doesn’t Appear Imminent

 | Apr 28, 2023 07:45AM ET

The US economy expanded at a much slower rate than expected in the first quarter, a prelude to recession, according to some forecasters. It would be naïve to rule out the possibility in the current climate, but there’s also a case for expecting the economy to muddle onward with a sluggish expansion.

Consider the breakdown of yesterday’s initial estimate of GDP in the first quarter. Output rose 1.1%, far below the consensus forecast for 2.0% and even further below Q4’s 2.6% increase (seasonally adjusted annual rates). Despite the broad slowdown, consumer spending wasn’t the catalyst.

In fact, personal consumption expenditures – the biggest slice of economic activity by far – accelerated, increasing 3.7% in the first three months of the year, the strongest pace in nearly two years. Supported by higher incomes and savings, Main Street continued to buy at a robust rate, offsetting some of the weakness in other corners of the economy. Indeed, business spending fell sharply as inventories declined and investing in housing and business equipment tumbled.