The U.S. economy got off to a surprisingly good start in 2023, but growth appears set to falter in the rest of the year as higher interest rates take a big bite.
Before the first quarter, many economists were predicting little to no growth. But fueled by an early surge in consumer spending, gross domestic product is forecast to rise 2% or more in the first quarter. Growth ran faster in the past few years, however, as the economy rebounded from the pandemic. Massive government stimulus policies and near-zero interest rates also helped turbocharge the economy.The government is still spending plenty of money, but the pandemic stimulus spending has mostly faded away. And the Federal Reserve has jacked up a key interest rate over the past year at the fastest clip in decades as it battles to bring down high inflation.
More recently, higher interest rates contributed to the failure of Silicon Valley Bank last month and to a brief bout of turbulence in the U.S. financial system. The Fed might not be done, either. Wall Street widely expects the central bank to raise rates at least once more this year, most likely in early May.Consumer spending — the main driver of the economy — is expected to slow somewhat further.
mrtgr Or, the same people who *were* wrong about the first quarter *are* wrong about the second half. When the story will be moderating inflation and better than 2022 income growth.