US GDP revised upwards for January-March quarter

US GDP increased at a slightly upwardly revised 1.4 per cent annualised rate for the last quarter, the Commerce Department’s Bureau of Economic Analysis (BEA) said in its third estimate of GDP for the January-March quarter on Thursday (Jun 27).

Growth was previously estimated at a 1.3 per cent pace. The economy grew at a 3.4 per cent rate in the fourth quarter.

“The increase in real GDP primarily reflected increases in consumer spending, residential fixed investment, non-residential fixed investment, and state and local government spending that were partly offset by a decrease in private inventory investment. Imports increased,” the BEA said in a statement.

Consumer spending grew just 1.5 per cent, down from an initial estimate of 2 per cent, in a sign that high interest rates may be taking a toll on the economy.

In another report, the Labor Department said first-time applications for US unemployment benefits drifted lower last week, which could allay fears of a material shift in the labour market.

Initial claims for state unemployment benefits dropped 6,000 to a seasonally adjusted 233,000 for the week ended June 22, the department said on Thursday. The claims data included last Wednesday’s Juneteenth National Independence Day, a new holiday. Claims tend to be volatile around public holidays.

They had risen to the upper end of their 194,000-243,000 range of this year.

Economists are split on whether the recent increase in claims pointed to rising layoffs or the repeat of volatility experienced during the same time last year.

Claims remain at historically low levels and are being closely watched for signs whether employers are laying off more people as the economy slows in response to the 525 basis points worth of interest rate hikes delivered by the Federal Reserve since 2022 to tame inflation.

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The US central bank has maintained its benchmark overnight interest rate in the current 5.25 per cent-5.50 per cent range since last July.

The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 18,000 to a seasonally adjusted 1.839 million during the week ending June 15, the claims report showed. The so-called continuing claims data covered the period during which the government surveyed households for June’s unemployment rate.

The jobless rate rose to 4.0 per cent in May for the first time since January 2022. Most economists, however, did not view the rate at the current level as posing a danger to the labour market, arguing that the increase was concentrated among the 35-44 age group, recent immigrants and certain industries.

“Though job growth will slow, it will remain sufficient to limit a significant and broad-based increase in the unemployment rate,” said Ryan Sweet, chief economist at Oxford Economics. REUTERS