US Q1 advance GDP +1.6% vs +2.4% expected

Weakest since Q1 2023Final Q4 reading was +3.3% annualized (revised to +3.4%)Q3 was +4.9% annualized


Consumer spending +2.5% vs +3.3% priorConsumer spending on durables -2.1% vs +3.2% priorGDP final sales 2.0% vs +3.9% priorGDP deflator 3.1% vs 3.0% expected (1.7% prior)Core PCE +3.7% vs +3.4% expected (+2.0% prior)Business investment +3.2% vs +0.7% prior

Percentage point changes:

Net trade pp -0.86 vs +0.32 pp prior Inventories -0.37 pp vs -0.47 pp priorGovt +0.21pp vs +0.79 pp prior

The market was pricing in 41.5 bps of Fed rate cuts this year with the July meeting priced roughly 50/50 ahead of the data. The market is focused on the hotter PCE numbers in the report afterwards and priced in a more-hawkish Fed at 36.5 bps. It’s notable that tomorrow we get the PCE report and the market is adjusting to price in something a tad hotter.

As for GDP itself, inventories may help to explain some of the delta as the March wholesale inventory data released alongside this report fell 0.4%. Ultimately though, you take it at face value at 1.6% annualized growth isn’t the kind of thing that’s going to spur demand-driven inflation. With that, I think the market is too focused on tomorrow’s PCE report here and no focused enough on a slowing economy and what it will mean for PCE report in the months beyond.

When you go through a lot of the details, it’s healthcare spending (that’s the USA) and non-residential fixed investment (IRA and CHIPS Act). Goods spending subtracted 0.09 pp from GDP.

This article was written by Adam Button at