According to our analysis USDJPY and EURUSD moved 18 pips on US Gross Domestic Product (GDP) data on 25 April 2024.

USDJPY (10 pips)

EURUSD (8 pips)

Charts are exported from JForex (Dukascopy).

Understanding the First Quarter GDP Growth of 2024

The U.S. economy started 2024 with a more moderate growth pace, as the Bureau of Economic Analysis (BEA) released its advance estimate showing a 1.6% annual growth rate in real Gross Domestic Product (GDP) for the first quarter. This figure marks a slowdown from the 3.4% growth recorded in the fourth quarter of 2023, hinting at a mixed economic landscape as the year unfolds.

Key Drivers of Growth

The modest growth in GDP this quarter was primarily driven by increased consumer spending, especially on services like healthcare and financial services. This was supplemented by gains in residential fixed investment and nonresidential fixed investment, as well as heightened activity in state and local government spending. However, these positive contributions were somewhat offset by a decline in private inventory investment and an increase in imports, which act as a subtraction in the calculation of GDP.

Among the standout sectors, the report highlighted a notable increase in intellectual property products and a surge in compensation for state and local government employees. On the downside, the automotive and energy sectors experienced declines, pulling the goods segment down despite the broader gains in services.

Economic Deceleration Points

The deceleration in GDP growth from the previous quarter can be attributed to slower consumer spending, a dip in federal government spending, and a decrease in exports. Although residential fixed investment showed acceleration, it wasn't enough to fully counterbalance the slowdowns elsewhere.

Inflation and Income Trends

Inflation indicators from the first quarter reveal a continued pressure on prices, with the price index for gross domestic purchases rising to 3.1% from 1.9% in the prior quarter. Similarly, the Personal Consumption Expenditures (PCE) price index climbed to 3.4%, up from 1.8%. These figures suggest an uptick in inflationary pressures, potentially influencing future monetary policy decisions.

On the income front, current-dollar personal income saw a substantial increase of $407.1 billion, a significant rise compared to the $230.2 billion increase in the previous quarter. This boost in personal income was largely fueled by rises in compensation and personal current transfer receipts. However, the personal saving rate dipped to 3.6% from 4.0%, indicating that despite higher incomes, savings were lower—perhaps a reflection of increased consumer confidence or rising costs.

Looking Ahead

While the first quarter GDP report shows growth, the mix of accelerating and decelerating factors across different sectors paints a complex picture of the U.S. economy. The forthcoming "second" GDP estimate due on May 30, 2024, will provide a clearer view as it will include more complete data.

Investors, policymakers, and analysts will be watching closely to see if these trends hold, particularly with regard to inflation and how it might shape responses from the Federal Reserve. Meanwhile, individuals will feel the impact of these economic shifts in their daily lives, from employment prospects to purchasing power.

In summary, the first quarter of 2024 has set the stage for a year that could be marked by careful balancing acts in economic policy and personal finance management, amidst a landscape of gradual growth and shifting investment dynamics.

Source: https://www.bea.gov/news/2024/gross-domestic-product-first-quarter-2024-advance-estimate

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