US growth revised lower as momentum softens
Economic growth in the US proved to be weaker than estimated amid rising geopolitical tensions and persistent inflationary pressures.
According to the Commerce Department’s Bureau of Economic Analysis, gross domestic product (GDP) expanded at an annualised rate of 1.6%. This marks a downward revision from the previously reported 2% and follows a subdued 0.5% growth rate recorded in the fourth quarter of last year. This downgrade was primarily due to weaker inventory investment and moderate consumer spending, especially across services such as healthcare.
Consumer spending, which accounts for more than two-thirds of US economic output, was revised lower to 1.4% from 1.6%. Overall economic activity continues to be supported by strong investment in artificial intelligence and robust business spending which remained steady at a 17.2% growth rate. Final sales to private domestic purchasers, which is a key measure of demand excluding trade, inventories and government spending, edged slightly lower to 2.4% from an estimated 2.5%.
Despite President Trump and his team promising outsized economic growth, the combination of these two modest quarters complicates the narrative of a healthy and growing US economy.
Eurozone economic sentiment climbs higher
The eurozone economic sentiment unexpectedly climbed higher in May, with the European Commission’s economic sentiment index rising to 93.5 from 93.2 in April. This defied expectations of a decline to near multi-year lows. The improvement was mainly driven by stronger confidence in the services sector and among consumers, with services sentiment improving after recent positive assessments on business activity and demand expectations.
Households also grew more optimistic about their future financial situation, the broader economic condition and their willingness to spend more over the coming year.
Broader economic conditions remain fragile, with sentiment still well below long-term averages and overall outlook weighed down by ongoing geopolitical tensions that have driven energy prices higher following disruptions in global supply routes.
Consumer price expectations also stabilised slightly but remain significantly above earlier levels, reinforcing the expectation that monetary policy will remain restrictive.
The uncertain economic environment has also led the European Commission to downgrade growth forecasts to 0.9% for the year while raising inflation projections to 3%.
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