Q1 2024 GDP growth misses expectations, falls to 1.6%
The initial GDP growth figures for Q1 2024 in the US have revealed a slowdown to an annualized 1.6%, a decrease from the previous quarter’s 3.4%, and missing the 2.5% economists had predicted. This represents the lowest growth rate observed since Q2 2022, signaling potential concerns for the US economy’s momentum.
US dollar slipped against major currencies
The US dollar experienced a downturn against key currencies, with GBP/USD climbing above 1.2500 and AUD/USD reaching 0.6500. This shift reflects mounting concerns over the future growth of the US economy and its impact on currency valuation.
US stocks fell sharply as stagflation fear builds
Fears of stagflation contributed to a significant drop in US stocks, with the S&P 500 plummeting below $5000 midmorning while the VIX, often referred to as the stock market’s fear gauge, escalated to 17.5. This sharp decline underscores growing investor anxiety over potential economic stagnation amidst persistent inflation.
Why this reading could be a lose-lose for the Fed and markets
The latest GDP figures present a challenging scenario for both the Federal Reserve and the financial markets, particularly as inflation data continues to prove sticky above 2%. This situation complicates the Fed’s path forward, potentially impacting monetary policy decisions.
PCE inflation data tomorrow could ease markets, or confirm fears
The forthcoming March PCE inflation data tomorrow morning represents a critical juncture. Should inflation show signs of converging toward the Fed’s 2% goal, it could signal a promising economic trajectory to lower rates. However, unyielding inflation may intensify concerns regarding the Federal Reserve’s next moves in stabilizing the economy.
