The US economy slowed dramatically at the start of 2023

  • The advance estimate for GDP from the Bureau of Economic Analysis shows the US economy is slowing.
  • US GDP grew at annualized rate of 1.1% in the first quarter of 2023.
  • That’s below the forecast of 2.0% and way below the 2.6% annualized rate in the fourth quarter of 2022.

While the US economy did grow in the first quarter of 2023 per new data from the Bureau of Economic Analysis, it was a dramatic slowdown.

That’s based on the advance estimate for gross domestic product (GDP). US GDP climbed at an annualized rate of 1.1% in the first quarter, far below the forecast of 2.0%. Additionally, that growth is also below the third estimate for the fourth quarter of 2022, which was 2.6%.

While the US economy is still growing based on the advance estimate out Thursday, it came in lower than growth rates in the second half of 2022, suggesting a slowdown.

“Compared to the fourth quarter, the deceleration in real GDP in the first quarter primarily reflected a downturn in private inventory investment and a slowdown in nonresidential fixed investment,” the news release from the Bureau of Economic Analysis on Thursday stated.

This could mean businesses may be getting ready for a recession, one that’s been on the horizon for some time now.

Additionally, personal consumption expenditures soared at a seasonally adjusted annual rate of 3.7%. That’s much higher than the 1.0% rate in the fourth quarter of 2022. After imports and exports both saw negative rates in the fourth quarter of 2022, both increased in the first quarter of 2023.

“It’s important to remember that GDP releases tell us more about where the economy is strong or weak in real time during a given period, versus how strong or weak it is in general,” Michael Madowitz, macroeconomic policy director at the Washington Center for Equitable Growth, said in a statement to Insider prior to Thursday’s release. “So, because this is the preliminary release, and revisions tend to be significant, it’s not the best gauge of how fast or slow the economy is growing overall.” 

Instead, he said employment data is actually better to look at to see what’s going on now. That’s because he said “revisions are smaller and the data is higher frequency.”

Job growth in the first quarter, based on monthly data from the Bureau of Labor Statistics, suggests that while the labor market is still strong, monthly job gains have cooled. The US unemployment rate still sat at a historically low 3.5% in March.

Inflation has been another economic metric on Americans’ minds for over a year, but the Bureau of Labor Statistics’ Consumer Price Index shows price growth has rapidly slowed down.

David Kelly, chief global strategist at J.P. Morgan Asset Management, wrote in a recent note that although the advance estimate for the first quarter was “likely to show positive growth,” he also noted that some data shows some warning signs in the economy. For instance, he said “unemployment claims have been rising in recent weeks.”

“In addition, survey data show a continued tightening of lending standards both as perceived by senior loan officers and small businesses,” Kelly wrote. “Delinquencies on consumer loans are rising and an expected restart of student loan repayments in the next few months could force consumers to retrench elsewhere. In short, the economy remains on the edge of a swamp – not in recession yet but close to one.”