Economy Surprises with Strong Start in 2023 Despite Rate Hikes to Combat Inflation: GDP Up 1.6% and Job Gains Continue

Despite fears following the Federal Reserve’s aggressive rate hikes to combat inflation, the US economy has continued to perform well since late 2022. The Commerce Department’s Bureau of Economic Analysis recently reported that Gross Domestic Product (GDP) increased at a 1.6% annualized rate in the first quarter, with growth primarily supported by consumer spending. This was a decline from the 3.4% growth rate seen in the fourth quarter of the previous year, but still above the non-inflationary growth rate of 1.8% that U.S. central bank officials consider sustainable.

Economists surveyed by Reuters had predicted a GDP growth rate of 2.4%, with a range of estimates from 1.0% to 3.1%. Despite the slowdown, job gains in the first quarter averaged 276,000 per month, an improvement from the previous quarter’s average of 212,000 and indicating that consumers are taking advantage of lower mortgage rates and businesses are refinancing debt before interest rates rise further.

The International Monetary Fund (IMF) recently revised its forecast for U.S. growth in 2024 to 2.7%, up from the earlier projection of 2.1%. This is due to stronger-than-expected employment numbers and consumer spending, which have helped propel economic growth despite fears surrounding inflation concerns that led to aggressive rate hikes by the Federal Reserve earlier in