Two the Point — Unpacking Q1 Economic Trends and Market Dynamics

Explore our analysis of Q1 economic performance, which reveals nuanced shifts in consumer behavior, inflation trends, and wage dynamics, collectively underscoring the resilience and complexity of the current economic landscape.

Key insights:

• Economic Growth: U.S. GDP increased by 1.6% on an annualized rate in Q1, with consumer spending adding 1.7 percentage points to growth, amidst challenges from higher imports and inventory adjustments.
• Consumer Spending: Real final sales to private domestic purchasers surged by 3.1%, highlighting enduring consumer confidence and spending strength.
• Inflation Trends: The PCED inflation rate rose to 3.4% in Q1 from 1.8% at the end of last year, with core inflation (excluding food and energy) also accelerating, though year-over-year core inflation continues to moderate.
• Wage Growth: The Employment Cost Index showed an unexpected increase to 1.2% from 0.9%, indicating rising wage pressures, though leading indicators suggest a future moderation in line with Federal Reserve objectives.
• Federal Reserve Policy: Market expectations stabilize with anticipation of continued strategic rate management by the Fed, reflecting a higher-for-longer stance in response to ongoing economic indicators.