Real GDP Growth Slows Dramatically

By SBE Council at 25 April, 2024, 2:37 pm

by Raymond J. Keating -

In the latest report on GDP (gross domestic product) from the U.S. Bureau of Economic Analysis, real GDP growth in the first quarter of 2024 slowed dramatically from the growth registered in the second half of 2023.

Real GDP grew at only 1.6 percent in the first quarter (seasonally adjusted annualized rate), and that compared to 3.4 percent in the fourth quarter 2023 and 4.9 percent in the third quarter.

It must be noted that despite talk in political and media circles about a great economy, when clear of the pandemic and its immediate aftermath, U.S. economic growth has been anything but robust, except for the two quarters in the second half of 2023.

Over the nine quarters since the start of 2022, real GDP growth was strong in two quarters, actually contracted in two quarters, and was below average in the other five quarters. Over these nine quarters, real GDP growth averaged a meager 1.9 percent.

Source: Federal Reserve Bank of St. Louis, FRED

As for the latest quarter's results, real personal consumption expenditures grew by 2.5 percent in the first quarter 2024, which was down from 3.3 percent in the fourth quarter 2023 and 3.4 percent in the third quarter.

Growth in real nonresidential fixed investment (or business investment) came in at an uninspiring 2.9 percent, with structures investment down by 0.1 percent, equipment up by only 2.1 percent, and intellectual property products investment increasing by 5.4 percent (best performance since the fourth quarter 2022). Meanwhile, residential investment spiked by 13.9 percent, after big declines in 2022 and 2023.

Meanwhile, the story on trade in the first quarter was split. Real exports barely moved up by 0.9 percent, while imports grew strongly at 7.2 percent. Keep in mind, imports are not negatives for the U.S. economy, as nearly all imports are inputs to U.S. businesses.

While strong growth is the second half of 2023 was most welcome, no one should have expected that solid growth would continue given the hostile policy environment at the federal level (and in many states) in terms of the imposition and push for higher taxes, increased regulatory burdens, protectionist trade policies, record high peacetime levels of government spending, sloppy monetary policy, and immigration policies hostile to labor market and entrepreneurship needs.

Make no mistake, what has been accomplished by the private sector on the economic growth front has been in spite of, not due to federal policymaking.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist, The Weekly Economist II:52 More Quick Reads to Help You Think Like an Economist and The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist.

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