The U.S.'s GDP growth in the first quarter of the year was revised downwards to 1.6% from 2% initially reported. The figure, given by the Commerce Department's Bureau of Economic Analysis, stood in contrast with the expectations of economists surveyed by Reuters, who expected it not to change.
The outlet went on to detail that economic activity is largely being driven by spending related to artificial intelligence. Consumer spending, which accounts for over two-thirds of the U.S. economy, was revised down to 1.4%. Business spending increased to 17.2%.
Analyses and reports about the current state of the economy point at a cloudy scenario as the war in Iran drags on, oil prices remain elevated and inflation forecasts rise.
In this context, U.S. consumer confidence declined slightly in May. The Conference Board's consumer confidence index dropped 0.7 points to 93.1. The entity added special questions to the survey, determining that rising prices have caused many Americans to change their spending habits.
Two-thirds of respondents said they have changed their spending habits, particularly by reducing purchases and delaying expensive acquisitions.
The figure follows a Gallup poll showing that Americans' confidence in the economy is now at a four-year low. Concretely, the pollster's Economic Confidence Index fell to -45, the lowest reading for the index since October 2022. The index remains above the lowest point of the Biden presidency, -58, which was reached in June 2022 as the economy was still reeling from the Covid-19 pandemic.
Another recent poll showed that more than three-quarters of Americans say their income is not keeping up with inflation.
The CBS News survey found that Americans are stressed about high gas prices and a feeling of uncertainty regarding the war with Iran. The war, launched in February by the U.S. and Israel, has dragged on for months and led to the closure of the Strait of Hormuz, a key waterway through which about a fifth of all global energy passes, leading to soaring prices.
One of the drivers of the economic anxiety to related to the fact that most Americans do not believe their income levels are keeping pace with rising costs. The poll found that only 23 percent said they were keeping up with inflation, with 77 percent saying they were not. Additionally, only 29 percent said the economy was in a good place.
At the same time, another survey showed economists are increasing their inflation forecasts and believe the Fed will take longer to cut interest rates given the current economic scenario.
Concretely, economists surveyed by Bloomberg said they expect inflation to clock in at 3.9% in the second quarter of the year, a 0.3 point increase compared to last month's poll. They also adjusted their forecasts for the rest of the year.
