The US economy is likely to grow at a strong pace in the first three months of the year and perhaps better than Wall Street expects, while still falling short of the strong level at the end of 2023. Gross domestic product, the sum of all goods and services produced throughout the sprawling US economy, It is expected to record an annual growth rate of 2.4% for the first quarter, according to Dow Jones forecasts. If this estimate is accurate, it would represent a decline from the 3.4% growth rate in the fourth quarter of 2023 and slightly below the full-year growth rate of 2.5% last year. However, it still reflects an economy showing strong progress and exceeding the average rate of 2.2% in the years between the 2008-09 financial crisis and the Covid pandemic that began in early 2020. Gregory Daco, chief economist at EY-Parthenon, said: A strong labor market continues to support strong income growth and thus consumer spending activity. “We're seeing a bit of a slowdown in terms of consumer spending momentum. Nothing dramatic.” Daco expects the economy to actually grow at a rate of 2.6%, slightly higher than expected, with consumption and parts of the housing sector, which is still trying to catch up with demand, acting as driving factors. The upbeat outlook is supported by the belief that the labor market remains resilient and is helping to drive consumer spending, which drove more than two-thirds of total activity in the fourth quarter. “We're seeing some signs that the job market is starting to cool,” Daco said. “We're seeing a modest slowdown in labor demand. You can see that in the employment rate, you can see that in hours worked, you can see that in the spread of job growth in the payroll report. But there's no form of reduction that would be dramatic.” “To worry in terms of future income trends and in terms of future consumer spending trends.” While Daco's growth forecast is more optimistic than consensus, there are other indicators that suggest GDP gains could be greater. The Atlanta Fed's GDP tracker for incoming data, which has shown strong accuracy especially as it approaches the Commerce Department's actual release date of the report, indicates a rate of 2.7%. Pointing to the above consensus level for the Atlanta Fed index, Goldman Sachs expects a growth rate of 3.1%, which it notes is a full percentage point lower than the second half of 2023 although well above the Street's view for the first quarter. The bank's forecast is based on four “key factors,” including a “sharp rise” in residential investment, a rebound in auto production and manufacturing activity and “another quarter of strong consumption growth,” Goldman Sachs economist Spencer Hill said in a note. Goldman Sachs expects consumption to rise by a higher-than-expected 3.3%, driven by a 1.1% increase in core retail spending and significant upward revisions in the March retail sales report from the Commerce Department. The GDP report will be released at 8:30 a.m. EST on Thursday and will also include data on the personal consumption expenditures price index, the Fed's headline inflation reading, as well as the “chain-weighted” price index, which is expected to rise. Showing a 3% quarterly increase.
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Thursday's GDP report will likely show that the economy is still growing at a strong pace
