Investors are preparing for a week, for the emergence of big economic data in the United States, including a first look at Economic growth Between January and March, the more inflation numbers.
US economic activity, as measured by gross domestic product, is expected to grow at an annual rate of just 1% during the first quarter of this year, according to forecasts by analysts at Refinitiv.
The GDP model now for the Federal Reserve Bank of Atlanta expects a seasonally adjusted annual growth rate of 1.3% as of mid-April, which will put the US administration in a difficult predicament.
This would be a sharp drop compared to the growth rate of regarding 6.9% in the last quarter of 2021 and would make it the worst three-month period since the pandemic recession in the second quarter of 2020.
Contrary to the shocking expectations of growth rates, the expectations of raising US interest rates still cast a shadow on the markets, especially with the statements and statements issued by the US Central Bank, which indicate several increases in interest rates during the current year in the context of containing the largest inflation wave the country has witnessed in more than 40 years.
Economists expect that growth will eventually slow from the pace seen during the grand reopening.
But even compared to the pre-coronavirus times, when the US economy was growing steadily at a more moderate pace, achieving a growth rate of 1% would be disappointing.
How did this happen? For example, companies rebuilt their inventories in the last three months of last year, which boosted economic activity, but that faded in the first quarter of 2022, according to economists from Action Economics.
The data indicate that the first quarter of this year began with the outbreak of a wave of the spread of the mutated “omicron”, which caused a rise in infections and the renewal of restrictions aimed at containing the spread of the virus.
While the effects were short-term, the long-term effect is only now becoming apparent.
Americans also had to worry regarding high prices and the continued rise in inflation, not to mention the Russian invasion of Ukraine, which led to a record rise in gas prices and the repercussions of this rise continuing to affect the prices of all goods and services.
In March, retail sales data released by the Census Bureau showed that overall sales were only boosted by spending at gas stations, with sales jumping nearly 9%.
This underscores an important point, since until now, American consumers are still spending freely, but much of that appears to be due to higher prices everywhere rather than increased consumption.
Although American consumers still have pent-up savings from the pandemic lockdown days, inflation levels not seen in 40 years are not making people go for extravagant shopping.
In the end, this reality will catch up with US economic growth, which needs healthy consumer spending.
