US Economy Slows in Q1 2024 as Corporate Profits Decline, BEA Reports

The US economy grew at an annualized rate of 1.3% in the first quarter of 2024, a significant slowdown from the 3.4% growth recorded in the fourth quarter of 2023, according to the estimates released by the Bureau of Economic Analysis (BEA) on Thursday.

This revised figure is slightly lower than the initial "advance" estimate of 1.6%, primarily due to a downward revision in consumer spending. While consumer spending, residential fixed investment, nonresidential fixed investment, and state and local government spending all contributed to the quarter's growth, the decline in private inventory investment and an increase in imports offset these gains.

"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," the BEA reported.

However, the latest data reveals a concerning trend in corporate profits. Profits from current production, which includes corporate profits with inventory valuation and capital consumption adjustments, decreased by $21.1 billion in the first quarter, a sharp contrast to the $133.5 billion increase recorded in the fourth quarter.

Profits of domestic financial corporations increased by $73.7 billion in the first quarter, a significant jump from the $5.9 billion increase in the fourth quarter. However, profits of domestic nonfinancial corporations plummeted by $114.1 billion, a reversal from the $136.5 billion increase in the previous quarter.

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.