Over the past three months, incoming U.S. economic data continue to show robust growth in the labor market, household consumption, and business investment, even as inflation remains well below its peak. Although headline GDP growth slowed more than expected in the first quarter, underlying demand from households and businesses remained remarkably strong. Moreover, the pace of job growth picked up in early 2024, prime-age labor supply improved, and the unemployment rate continued to remain low. It is likely that the health of the labor market is buttressing private demand and, with it, economic growth in 2024.

Inflation has been slower to come down than expected after the rapid decline observed in 2023. Although headline inflation is down nearly two-thirds from its peak in 2022, it remains too high for American families, and the effects of elevated prices compared with the pre-pandemic era may be weighing on consumer sentiment. Continued progress is needed to bring core inflation to a level consistent with the Federal Reserve’s target while allowing our economy to continue to grow. The Biden Administration remains committed to helping this effort over the long term by expanding our economy’s productive capacity through significant investments in clean energy, manufacturing capacity, and infrastructure.

REAL GROSS DOMESTIC PRODUCT (#GDP).
Real GDP growth slowed to 1.6 percent in the first quarter of 2024, following strong advances in the second half of 2023. The slower growth rate was largely attributable to drag from net exports and the change in private inventories, whereas private domestic final demand (PDFP) maintained a solid pace of growth, attesting to underlying momentum in the domestic economy (see Table 1 – Real Gross Domestic Product).

PDFP—composed of personal consumption expenditures (PCE), business fixed investment (BFI), and residential investment—captures the most stable and persistent components of economic growth. Although PCE and BFI growth slowed...

LABOR MARKETS.
During this year’s first quarter, the average pace of payroll job creation accelerated, while indicators in the household employment survey—such as the unemployment rate and the labor force participation rate (LFPR)—held close to their 2023 fourth quarter averages. Even so, there was further progress in correcting imbalances between labor supply and demand (see Table 2 – Labor Market Indicators).

After slowing to 212,000 jobs per month ...

INFLATION.
Headline #inflation picked up during the first quarter of 2024 but, by March, was still about 60 percent below the peak in June 2022 on a year-over-year basis. As measured by the consumer price index (CPI), the average monthly rate of inflation during the first quarter was 0.4 percent (or 4.6 percent at an annual rate), up from an average 0.2 percent per month (1.9 percent annualized) during the fourth quarter of 2023 (see Table 3 – Inflation and Wage Growth Indicators).

Energy price inflation turned positive in the first quarter, rising 0.8 percent per month on average, after declining steadily throughout the fourth quarter. Since January, energy prices have been bolstered by geopolitical tensions, repeated extensions of OPEC+ production cuts, and the expectation that an improving global macroeconomic outlook will boost oil demand.
Average monthly food inflation remained stable in the first quarter at 0.2 percent, matching the average pace in the third and fourth quarters of 2023. In short, food price inflation appears to have stabilized near rates observed prior to the pandemic.
Meanwhile, core inflation accelerated in the first quarter to 0.4 percent on average per month (4.5 percent at an annual rate), up from 0.3 percent per month (3.2 percent annualized) in the latter half of last year. Even so, twelve-month core inflation in March was down by more than 40 percent from its peak in the autumn of 2022.

Core goods #prices...

HOUSING MARKETS,
RISKS TO THE OUTLOOK,
CONCLUSION,