In an unexpected turn of events, the U.S. economy's annual growth rate for the first quarter of 2023 has been revised upwards by 0.7%, to a solid 2%, exceeding market expectations of 1.4%, according to final data from the U.S. Department of Commerce, published on June 29.
This GDP data revision was largely attributed to upward adjustments in export figures and consumer spending. However, non-residential fixed investment and federal government expenditures saw downward revisions.
The Commerce Department's report highlights that the real GDP growth in the first quarter was primarily driven by robust consumer spending, particularly in goods-mainly automobiles and parts-and services, chiefly healthcare, food services, accommodation, and other services. Notably, consumer spending on durable goods surged by 16.3%. Overall, consumer spending rose by 4.2%, exceeding the market forecast of 3.8%.
Conversely, the contribution to GDP from inventory investments decreased, reflecting a contraction in wholesale trade and manufacturing.
Compared to the growth rate of 2.6% in the last quarter of 2022, the U.S. economy showed moderate growth. The slowing pace of real GDP growth was mostly a reflection of a decrease in inventory investments and a deceleration in business investment. Among private service-producing industries, healthcare and social assistance, retail trade, real estate and leasing, accommodation, and food services saw the most significant increases, with decreases in the financial and insurance sectors offsetting some of these gains.
Economists suggest that strong economic growth implies that the Federal Reserve has ample room to continue raising interest rates to reach its 2% inflation target.
Looking forward, the short-term outlook for the U.S. economy remains uncertain. Factors such as global trade tensions, geopolitical incidents, and fluctuations in consumer sentiment may impact future GDP growth. Despite modest growth in the first quarter, potential headwinds still confront the future.
The better-than-expected economic data also diminished the safe-haven appeal of gold. Following the report's release, gold prices plunged, with spot gold dropping below the key $1900 threshold, to stand at $1896 per ounce.
