Biden Expects Positive Q1 GDP, but Inflation Progress May Stall

Anticipation builds for Q1 2024 GDP data, as Biden eyes positive growth but inflation concerns linger. Investors and policymakers eagerly await insights into the US economy's trajectory.

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Trim Correspondents
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Biden Expects Positive Q1 GDP, but Inflation Progress May Stall

Biden Expects Positive Q1 GDP, but Inflation Progress May Stall

President Joe Biden anticipates positive first-quarter GDP data to be released on April 27, 2024, but Friday's economic numbers may indicate stalled progress in combating inflation in the United States. The U.S. Bureau of Economic Analysis will reveal the Q1 2024 GDP report, which economists, analysts, and investors will rely on for positioning moving forward.

Economists expect the GDP growth to be less than 3% in Q1, driven by strong productivity growth. The GDPNow estimate for Q1 2024 real GDP growth is 2.9%, up from 2.8% the previous day. Consumption expenditures likely grew over 3.0%, with service consumption surpassing goods consumption, but service consumption remains below pre-pandemic levels.

The March Personal Consumption Expenditure (PCE) deflator, to be revealed in the GDP report, will provide insight into whether the rise in inflation signals a sustained uptick or temporary factors. Core PCE inflation was slightly above the Fed's 2% target, driven by higher housing costs. The GDP Price Index, which reflects the inflation rate, is expected to rise by 3.0% in the first quarter, up from 1.7% in the previous quarter.

Why this matters: The U.S. GDP report and the Personal Consumption Expenditures Price Index will be closely watched by investors and policymakers for insights into the state of the U.S. economy and the trajectory of inflation. The data can move markets, and a 'hot' GDP report could be a negative catalyst for the market.

Despite the economy seeing some cooling down moments, with unemployment rates potentially pushing through 4.3% by the end of next year, the U.S. economy is still outpacing other advanced economies. Consumers have been spending freely, and businesses have been investing in manufacturing and green technology.

However, progress in combating inflation has stalled, with the Federal Reserve signaling that they are in no hurry to cut rates. The Biden administration faces criticism from Republican opponents who blame the president for high prices, even as the economy remains resilient.

The macroeconomic outlook remains consistent with growing anticipation among market participants of the U.S. Federal Reserve's first interest rate reduction in September, with a probability of around 70%. The upcoming GDP report and PCE data will provide key macroeconomic indicators that will shape the economic narrative and policy decisions in the coming months.

Key Takeaways

  • Biden expects positive Q1 2024 GDP data, but inflation progress stalled.
  • Q1 2024 GDP growth forecast at 2.9%, driven by strong productivity.
  • March PCE deflator and GDP Price Index to provide inflation insights.
  • GDP report and PCE data to shape economic narrative and policy decisions.
  • US economy resilient, but faces criticism over high prices from Republicans.