US economic growth is lagging

The US economy grew far less than economists had expected in the first quarter. Businesses, among others, have been more cautious and invested less. At the same time, consumer spending rose sharply, in part because more cars were purchased. During the quarter, US households spent less money.

Growth in the US economy was 1.1%, compared to 2.6% in the last three months of last year. Economists generally expected US economic growth of 1.9%.

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Increased interest

The decline in growth may be the result of the sharp rise in US interest rates. A further Fed hike is expected as inflation remains high. But the slowing economy could encourage central bankers to be cautious. At the same time, an inflation rate closely watched by Federal Reserve policymakers rose faster than at the end of last year and also faster than expected.

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The 1.1% increase is an annualized figure. This means that quarter-on-quarter growth is artificially prolonged as if it had remained at that level for an entire year. According to the method used in Europe, growth in the United States in the first quarter would have been 0.3%.