Growth slowed sharply last quarter, reflecting pressure by high rates
WASHINGTON — The nation’s economy slowed last quarter, growing at an annual rate of 1.6% in a sign that the high interest rates may be taking a toll on borrowing and spending.
Thursday’s report from the Commerce Department said the gross domestic product — the economy’s total output of goods and services — decelerated from its brisk 3.4% growth rate in the final three months of 2023. Consumers continued to drive growth in the January-march quarter but slowed their spending. Growth was also held back by businesses reducing their inventories.
The state of the U.S. economy has seized Americans’ attention as the election season has intensified.
Although inflation has slowed sharply, to 3.5% from 9.1% in 2022, prices remain well above their pre-pandemic levels.
Republican critics of President
Joe Biden have sought to pin responsibility for high prices on Biden and use it as a cudgel to derail his re-election bid. And polls show that despite the healthy job market, a near-record-high stock market and the sharp pullback in inflation, many Americans blame Biden for high prices.
The economy’s gradual slowdown reflects, in large part, the much higher borrowing rates for home and auto loans, credit cards and many business loans that have resulted from the 11 interest rate hikes the Federal Reserve imposed in its drive to tame inflation.
Even so, the United States has continued to outpace the rest of the world’s advanced economies. The International Monetary Fund has projected that the world’s largest economy will grow 2.7% for all of 2024, up from 2.5% last year and more than double the growth the IMF expects this year for Germany, France, Italy, Japan, the United Kingdom and Canada.