US GDP growth slowed in Q1 but details stronger – RBC

Analysts at RBC Economics offer their afterthoughts on the preliminary estimate of the US Gross Domestic Product (GDP) data released for the first quarter on Thursday.

Key quotes

“US GDP growth slowed to 1.1% (annualized) in Q1 2023, following a larger 2.6% increase in Q4 2022. Details reflected strong consumer fundamentals, with offset from weaker inventory investment. 

“Consumer spending rose 3.7% in Q1 supported by a surge in vehicle sales (+45.3%). Service spending also maintained momentum, rising by 2.3%.” 

“Business fixed investment ticked slightly higher in Q1 (+0.7%), and solid domestic demand led to stronger imports though exports also rose.”

“The strong fundamentals in Q1 GDP should cement a 25 bp hike from the Federal Reserve next week. However, there are signs that growth momentum began to taper off later in Q1.”

“Higher rates should continue to slow household demand for goods and services in the quarters ahead, moderating growth in prices along the way.“