GDP growth slows in first quarter; local job numbers decline

U.S. Real gross domestic product increased at a seasonally adjusted annual rate of 1.6% in the first quarter, down from a revised 3.4% increase in the fourth quarter of 2023. Current expectations are for a return to a growth rate that is closer to trend for the remaining quarters of 2024. At this point, a return to trend growth with inflation heading back down to 2% would probably meet the criteria for the much anticipated "soft landing."

However, inflation remains stubborn. The Federal Reserve's preferred inflation gauge, the Personal Consumption Expenditures price index inched up in March, fueling speculation that interest rates might be pushed back yet again.

Higher interest rates are definitely squeezing businesses, as we find in our Business Outlook Survey, contributing to a less optimistic view of the national economy among local survey respondents. Even so, a smaller percentage of respondents expect raising prices for their goods and services in the next six months compared to last quarter.

Manufacturing job growth in the Quad Cities metro has been flat for several months, and elevated interest rates are at least partly to blame. While local job numbers decreased slightly, they are nowhere near recessionary levels. Survey respondents mostly expect little change in economic activity in their own companies in the next six months, and hiring is expected to be stable. This indicates that the decline could simply be a minor blip in the growth trend with better conditions on the way when interest rates decrease.

The date for interest rate cuts is now expected to be around September, although hotter than expected inflation or economic growth could throw a wrench in those plans. Conversely, the most significant threats to economic growth are the unexpected shocks (geopolitical, oil prices, productivity) that are difficult, if not impossible, to predict.

The Chamber received more requests for information (RFIs) for business attraction projects than in the same period a year ago (33 compared to 24 last year). The Chamber, along with our economic development partners throughout the region, answered 12 of those RFIs this quarter.

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