The American economy expanded at a sluggish pace of 1.4% annually in the first quarter of 2024, according to a government report released on Thursday. This marks the slowest quarterly growth since the spring of 2022, albeit a slight upgrade from the previous estimate. The Commerce Department had initially estimated the gross domestic product (GDP) to advance at a rate of 1.3% in the first quarter.

The report indicates a concern as consumer spending grew at a rate of just 1.5%, down from the initial estimate of 2%. This decline suggests that high interest rates may be taking a toll on the economy. Consumer spending is a crucial driver, accounting for approximately 70% of U.S. economic activity.

However, the report also revealed that the slowdown can largely be attributed to two factors - a surge in imports and a drop in business inventories - which can fluctuate from quarter to quarter and do not necessarily reflect the overall health of the economy. Imports alone subtracted 0.82 percentage points from the first-quarter growth, while lower inventories contributed to a 0.42 percentage point deduction.

Despite the dip in consumer spending, business investment showed promise, with the government stating that it rose at a 4.4% annual pace in the first quarter, up from the previous estimate of 3.2%. This increase can be attributed to higher investments in factories, nonresidential buildings, software, and intellectual property.

After experiencing solid growth of over 3% in the second half of 2023, consumer spending significantly decelerated in the first quarter of 2024. Spending on appliances, furniture, and other goods fell at a 2.3% annual rate, while spending on travel, restaurant meals, and other services increased at a rate of 3.3%.

Economists have expressed expectations of a stronger growth rate in the current April-June quarter. However, an Oxford Economics forecasting model suggests a tepid 1.3% growth rate for this quarter, based on reported economic statistics thus far.

The U.S. economy has demonstrated surprising resilience in the face of higher interest rates. Despite the Federal Reserve's 11 rate hikes between 2022 and 2023, the economy continued to grow, although at a slower pace. Employers have also maintained their hiring activities, with the nation adding 272,000 jobs in May. However, concerns remain as discontent arises regarding the high overall prices that are still evident in the economy.

In terms of inflation, the report showed that price pressures intensified in the first quarter of 2024. Consumer prices rose at a rate of 3.4% annually, up from 1.8% in the fourth quarter of 2023. Excluding volatile food and energy costs, core inflation increased at a rate of 3.7% annually, up from 2% in each of the previous two quarters.

Given the persistent inflation pressures, the Federal Reserve's policymakers have revised their forecast and now anticipate a single rate cut in 2024, down from the previous projection of three rate cuts. Most economists predict that the first rate cut will occur in September, with a possibility of another cut in December.

The state of the economy is expected to take center stage in tonight's debate between President Joe Biden and presumptive Republican nominee Donald Trump. While the economy remains healthy by most measures, concerns over elevated prices, especially in areas like rent and groceries, have fueled frustration among Americans.

The Commerce Department will release its first estimate of the second quarter's economic performance on July 25, providing further insights into the ongoing trajectory of the U.S. economy.