GDP up 1.6 percent in Q1

Gross domestic product increased at an annual rate of 1.6 percent in the first quarter of the year, according to the Bureau of Economic Analysis

The increase was less than expected from economists surveyed by Dow Jones, who projected an increase of 2.4 percent, following a 3.4 percent rise in the fourth quarter of last year. Consumer spending increased 2.5 percent, down from 3.3 percent late last year. Imports increased 7.2 percent, while exports increased 0.9 percent. Government spending increased 1.2 percent, driven by an increase in state and local government spending. 

Reflecting increases in compensation and transfer receipts, personal income rose $407.1 billion in the first quarter, much higher than its $230.2 billion fourth-quarter increase. Disposable personal income increased 4.5 percent or $226.2 billion, compared with 3.8 percent or $190.4 billion in the fourth quarter. Those increases were partially offset by a rise in personal taxes. Personal savings fell to $755.7 billion (3.6 percent) from $815.5 billion (4 percent) in the fourth quarter.

Those numbers come as uncertainty continues over when the Federal Reserve will start reducing interest rates. The Fed is likely to cut interest rates 25 basis points three times in the second half of the year, according to the American Bankers Association Economic Advisory Committee. The rate cuts are expected to enable GDP growth of 1.7 percent this year and 1.8 percent in 2025.  

Plans to reduce interest rates were complicated as inflation increased at a higher-than-expected 3.5 percent clip for the 12 months ending in March. The Federal Reserve will review whether inflation moves past its current rough stretch before cutting interest rates, said Federal Reserve Chair Jerome Powell earlier this month. On April 5, Federal Reserve Gov. Michelle Bowman said interest rate increases could be necessary to control inflation.