The American economy, boosted by healthy consumer spending, is believed to have regained some momentum this spring after having begun 2024 at a sluggish pace.
This year’s slowdown reflects, in large part, the much higher borrowing rates for home and auto loans, credit cards and many business loans resulting from the aggressive series of rate hikes the Federal Reserve imposed in its drive to tame inflation. The Fed raised its benchmark rate 11 times in 2022 and 2023, to its current 23-year peak of roughly 5.3%.
The slowdown at the start of this year was caused largely by two factors, each of which can vary sharply from quarter to quarter: A surge in imports and a drop in business inventories. Neither trend revealed much about the economy’s underlying health. Consumer spending did slow as well, though: It grew at a 1.5% annual pace from January through March after having topped 3% in both the third and fourth quarters of 2023.