GDP Report: Economy Grew by 1.6% in First Quarter of 2024

Updated April 25 with the latest GDP estimate from the Bureau of Economic Analysis.

The U.S. GDP grew at a much more modest pace in the first quarter of 2024 than in 2023, according to the latest figures in the advance estimate of real gross domestic product from the Bureau of Economic Analysis released on April 25.

The GDP is the market value — in current dollars — of all goods and services produced within the United States in a given period; Real GDP adjusts that measure for inflation. Changes in GDP are expressed on an annualized basis.

The first quarter — January, February and March — saw an annual growth rate of real GDP by 1.6%, the advance estimate shows. That’s the first of three first-quarter estimates the BEA will release in the coming months. The growth rate was lower than the fourth quarter, and lower when compared to the annual growth earlier in 2023:

• 3.4% annual rate of growth in Q4 2023.

• 4.9% annual rate of growth in Q3 2023.

• 2.1% annual rate of growth in Q2 2023.

• 2.1% annual rate of growth in Q1 2023.

The second estimate of the GDP of the first quarter of 2024 will be released on May 30.

Why did GDP increase in Q1 2024?

The increase in real GDP was largely due to increases in consumer spending, residential fixed investment and state and local government spending, according to the report.

At the same time, private inventory investment decreased and imports went up. Imports subtract from GDP.

Changes to acceleration in GDP

Compared with Q4 2023, the report says the deceleration in GDP in Q1 2024 was caused by the decline in federal government spending, as well as slowdowns in:

• Consumer spending.

• Exports.

• State and local government spending.

What did consumers spend money on in Q1 2024?

Consumer spending increased in services and decreased in goods. Here’s the breakdown of spending:

Goods: Decreases were primarily in motor vehicles and parts, gasoline and other energy goods.

Services: Increases were led by health care, financial services and insurance.

Excluding food and energy (which have the most volatile prices), the PCE price index increased 3.7% in Q1 2024 — faster than the two most recent quarters:

• 2.0% in Q4 2023.

• 2.3% in Q3 2023

• 3.7% in Q2 2023.

• 5.0% in Q1 2023.

How did personal income change in Q1 2024?

Personal income increased in Q4 2023 while personal savings slowed, according to the report.

• Current-dollar personal income (all sources of income including wages and salaries, government benefits, dividends and interest, business ownership and more) increased $407.1 billion in Q1 2024, according to the advance report. In Q4 2023, current-dollar personal income increased $230.2 billion.

• Disposable personal income (equal to personal income minus taxes) increased 4.5% in the first quarter of 2024 compared to a 3.8% increase in the fourth quarter of 2023. Real disposable personal income also increased 1.1% in the first quarter compared to a 2% increase in the fourth quarter.

• The rate of personal savings (personal savings as a percentage of disposable personal income) slowed in Q1: 3.6% compared with 4% in Q4 2023. 

How did GDP in 2023 compare to recent years?

In 2020, at the beginning of the COVID-19 pandemic, the annual rate of GDP dropped to levels far below even those during the Great Recession, federal data shows. By the end of 2020 and into 2021, GDP rebounded quickly. However, the first two quarters of 2022 showed signs of slowing down before a more robust finish at the end of the year.

GDP continued its upward trajectory throughout 2023: Real GDP increased 2.5% in 2023, a 0.6 percentage point increase from real GDP in 2022 (1.9%). That rise was largely due to consumer spending, nonresidential fixed investment, state and local government spending, exports, and federal government spending. GDP growth was partly offset by decreases in residential fixed investment and inventory investment. Imports, which are not included in the total GDP calculation, decreased.

Here’s what else factored into overall GDP in 2023:

• The Current-dollar GDP increase slowed, rising 6.3% (about $1.61 trillion) in 2023, compared with a 9.1% increase in 2022. 

• The price index for gross domestic purchases increased 3.4% in 2023. Compare that with a 6.8% increase in 2022. 

• The Personal Consumption Expenditures price index increased 3.7% in 2023, compared with 6.5% in 2022. The core PCE — minus food and energy — increased 4.1% compared with an increase of 5.2%. The Federal Reserve watches the core PCE closely when determining rate hikes.