U.S. GDP Growth Disappoints

The Federal Reserve’s preferred inflation gauge, the personal consumption expenditures price index, grew at an annualized rate of 3.4% in the first quarter, nearly double the 1.8% pace logged during the fourth quarter.

Core PCE inflation, which excludes the more volatile costs of food and energy, climbed 3.7% in the first three months of the year, up from the fourth quarter’s 2% pace, the Bureau of Economic Analysis said Thursday.

Thursday’s quarterly inflation data suggest, assuming no revisions to monthly data, that the core PCE deflator for March, to be released Friday, will come in above 0.4% rather than the current consensus forecast for a month-over-month increase of 0.3%, writes James Knightley, chief international economist at ING.

It is worth noting that the bureau did say that the first GDP estimate and corresponding data are “incomplete or subject to further revision by the source agency.”

Thursday’s report confirms the trend of accelerating inflation, writes Olu Sonola, Fitch's head of U.S. economic research. “The hot inflation print is the real story in this report. If growth continues to slowly decelerate, but inflation strongly takes off again in the wrong direction, the expectation of a Fed interest rate cut in 2024 is starting to look increasingly more out of reach," Sonola said.