The U.S. economy may have expanded at a solid pace in the first three months of the year and even better than Wall Street expected, while ending 2023 will remain below robust levels. Gross domestic product, the sum of all goods and services produced across the broader U.S. economy, is expected to post a 2.4% annual growth rate in the first quarter, according to a Dow Jones consensus estimate. If that estimate is accurate, it would be a step down from the 3.4% growth rate in the fourth quarter of 2023 and a touch lower than last year's 2.5% full-year growth rate. However, this would still reflect an economy showing a solid improvement over the 2.2% average rate in the years between the 2008-09 financial crisis and the start of the Covid pandemic in early 2020. A solid labor market continues to support strong income growth and support consumer spending activity,” said EY-Parthenon Chief Economist Gregory Tago. „We are seeing some cooling in terms of the pace of consumer spending. Nothing dramatic.” Daco expects the economy to actually grow at a pace of 2.6%, slightly ahead of consensus, with parts of the consumption and housing sectors, still trying to catch up with demand, acting as driving factors. The labor market is still driving consumer spending, which drove more than two-thirds of all activity in the fourth quarter. Retention and incentives are based on an optimistic outlook. „We're seeing some signs that the labor market is starting to cool,” Daco said. You can see the hiring rate, the number of hours you worked, and the spread of job growth on payroll reports. But there is no pattern. Downsizing remains a threat in terms of future income trends and future consumer spending trends.” While Daco's outlook for growth is more favorable than consensus, there are other indicators that GDP gains may be higher. The Atlanta Federal Reserve's GDPNow tracker of incoming data has shown solid accuracy, particularly in the report. As the real business sector nears the release date, this implies a rate of 2.7%. Noting the consensus level of the Atlanta Fed indicator, Goldman Sachs forecasts a growth rate of 3.1%, a full percentage point below the second half of 2023, but higher than the Street view. The bank's forecast is based on four „key factors,” including a „sharp rise in residential investment,” a rebound in both auto manufacturing and manufacturing activity and „another quarter of strong consumption growth,” Goldman economist Spencer Hill said in a note. Goldman expects consumption to rise above the 3.3% consensus, driven by a 1.1% gain in core retail spending and large upward revisions in the business sector's March retail sales report. The GDP report will be released at 8:30 a.m. Thursday and will include the personal consumption expenditures price index, the central bank's core inflation and a „chain-weighted” price index. Showing a quarterly increase of 3%.
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