In the latest economic report released by the U.S. government, it was revealed that the American economy expanded at a sluggish 1.4% annual pace from January through March. This marks the slowest quarterly growth since spring 2022, although it was a slight upgrade from the previous estimate.

One contributing factor to the lackluster growth was a decline in consumer spending, which grew at just a 1.5% rate compared to the initial estimate of 2%. This suggests that high interest rates may be taking a toll on the economy. Consumer spending plays a crucial role, accounting for roughly 70% of U.S. economic activity.

The report also highlighted that the first quarter's GDP growth was primarily impacted by two factors – a surge in imports and a drop in business inventories. Imports alone subtracted 0.82 percentage point off first-quarter growth, while lower inventories subtracted 0.42 percentage point.

However, there were some positive developments in other areas of the economy. Business investment rose at a 4.4% annual pace last quarter, up from the previous estimate of 3.2%. Increased investment in factories, nonresidential buildings, and intellectual property helped to boost this growth.

Despite the slowdown, economists remain optimistic that growth will strengthen in the current April-June quarter. However, an Oxford Economics forecasting model suggests a tepid 1.3% growth rate for this quarter, based on the economic statistics reported so far.

The U.S. economy has shown resilience in the face of higher interest rates, as the Federal Reserve raised its benchmark rate 11 times in 2022 and 2023 to tackle rising inflation. Many economists had predicted an economic downturn as a result of the higher consumer borrowing rates. Yet, the economy has continued to grow, though at a slower pace, and employers have continued to hire.

President Joe Biden and Donald Trump, the presumptive Republican presidential nominee, are expected to debate the state of the economy, as it remains a central topic. Despite the overall health of the economy and a decrease in inflation from its peak, many Americans are still frustrated with the higher prices, particularly in rents and groceries.

Inflation pressures were evident in the first-quarter GDP report, as consumer prices rose at a 3.4% annual pace, up from 1.8% in the previous quarter. Core inflation, excluding food and energy costs, also rose to 3.7% annually, up from 2% in each of the previous two quarters.

In light of these inflation pressures, the Federal Reserve's policymakers have revised their forecast, predicting only one benchmark rate cut in 2024 instead of the previous projection of three. Most economists anticipate the first rate cut to occur in September, with the possibility of a second cut in December.

This report serves as the final government estimate of first-quarter GDP growth, and the Commerce Department is set to release its first estimate of the current quarter's economic performance on July 25.