US Economy Grew at a Slower Pace in Q1 2024, Corporate Profits Decline, BEA Reports

The US economy expanded at an annualized rate of 1.4% in the first quarter of 2024, according to the estimate released by the Bureau of Economic Analysis (BEA) on Thursday. This represents a slight upward revision from the second estimate of 1.3% growth, but still signals a significant slowdown from the 3.4% growth recorded in the fourth quarter of 2023.

The upward revision was primarily driven by downward revisions to imports and upward revisions to nonresidential fixed investment and government spending. These positive revisions were partially offset by a downward revision to consumer spending.

Despite the upward revision, the data highlights a concerning trend in corporate profits. Profits from current production, which includes corporate profits with inventory valuation and capital consumption adjustments, decreased by $47.1 billion in the first quarter, a significant decline from the previous estimate.

Profits of domestic financial corporations increased by $65.0 billion in the first quarter, but this was offset by a decline in profits of domestic nonfinancial corporations, which decreased by $114.5 billion.

This decline in corporate profits suggests a potential weakening in business investment and overall economic activity. While consumer spending remains a driving force, its strength may not be enough to offset the drag from declining corporate profits.

The BEA's latest estimates provide a more nuanced picture of the US economy, highlighting a mixed bag of signals. While consumer spending remains a source of strength, the decline in corporate profits raises concerns about the sustainability of the economic recovery and the potential for future growth.

"The increase in real GDP primarily reflected increases in consumer spending, residential fixed investment, nonresidential fixed investment, and state and local government spending that were partly offset by a decrease in private inventory investment," states the BEA.