Summary
- The US said first-quarter GDP grew 2.0%%, rebounding sharply from 0.5%% in the fourth quarter of last year.
- It said the PCE price index rose 3.5%% in March and core PCE increased 3.2%%, adding to inflation pressure.
- It said a prolonged Iran war could lead to a sustained period of elevated inflation and a slowdown in economic growth.
Forecast Trend Report by Period
March PCE Rises 3.5%, Matching Estimates
Jobless Claims Fall to Lowest Since 1969
The US economy posted solid growth despite the war with Iran. Still, a prolonged conflict could keep price pressures elevated.
The Commerce Department said on April 30 that its advance estimate showed first-quarter gross domestic product increased at an annualized 2.0%. That was slightly below economists’ 2.2% forecast compiled by Dow Jones. The US publishes GDP data in three rounds: advance, second and final estimates.
The figure marked a sharp rebound from 0.5% growth in the fourth quarter of last year. Business and consumer demand helped restore growth above 2% in the first quarter. Consumer spending, which accounts for about two-thirds of US economic activity, rose 1.6% on stronger demand for services. Business investment in equipment and facilities climbed 10.4%, the fastest pace in about three years. Bloomberg reported that a surge in artificial-intelligence investment helped support the increase. The economy remained resilient even as the Iran war drove oil prices sharply higher and raised risks to global supply chains, Bloomberg said.
The labor market also remained relatively stable. The Labor Department said weekly initial jobless claims for the period ended April 25 totaled 189,000. That was the first time since 1969 that new claims fell below 190,000.
Still, growth could slow if the war with Iran drags on and keeps inflation high. The first-quarter GDP data reflected only a limited impact from the conflict. The personal consumption expenditures price index rose 3.5% in March from a year earlier and 0.7% from the previous month. Both figures matched economists’ forecasts compiled by Dow Jones. The monthly increase was the highest since 2022. Bloomberg reported that inflation pressures intensified in March as the war triggered a sharp jump in gasoline prices.
The core PCE price index, which excludes food and energy, rose 3.2% from a year earlier and 0.3% from the previous month.
The core PCE price index is the inflation gauge the Federal Reserve watches most closely when setting interest rates. Markets were focused on the report because it was the first PCE reading to fully reflect the impact of the Iran war.
Han Myeong-hyeon, Hankyung.com reporter, wise@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
