US economy grew less than expected in first quarter at 1.6% rate

Stay informed with free updates

Simply sign up to the US economy myFT Digest — delivered directly to your inbox.

The US economy grew less than expected for the first quarter of 2024, at an annualised rate of 1.6 per cent, but price pressures were more than expected.

The growth figure from the Bureau of Economic Analysis was far below analysts’ expectations of a 2.5 per cent rise and the revised rate of 3.4 per cent for the fourth quarter.

But inflation data released as part of the figures was higher than forecast, casting doubt on the potential for US Federal Reserve rate cuts.

Investors scaled back their bets on rate cuts, with the Fed’s first quarter point reduction now expected in November, compared with September before the data release.

The 10-year US Treasury yield, which moves inversely to bond prices, climbed 0.07 percentage points to 4.72 per cent, the highest level in five months.

Sameer Samana, senior global market strategist at Wells Fargo, described the release as “almost stagflationary, where you’ve got growth slowing but prices are still a little bit stickier than markets and the Fed had hoped for”.

US stock futures also extended their declines after the release, with contracts tracking Wall Street’s S&P 500 down 1.2 per cent.

The robust US labour market and high levels of consumer spending had previously added to concerns that inflation will take longer than expected to bring down to the Fed’s 2 per cent target.

US President Joe Biden has been hoping the robust economy will help him overtake his Republican rival Donald Trump ahead of November’s election. But borrowing costs are still at a 23-year high, with traders trimming their bets on how many times the Fed will cut rates this year owing to persistent inflation.

This is a developing story