US economic growth is expected to have slowed sharply in the first quarter amid growing trade imbalances and rising inflation, but the deceleration is unlikely to alter the Federal Reserve’s course.

Economists forecast a 1 per cent advance in US gross domestic product on an annualised basis in the first quarter, according to Bloomberg data, down sharply from the 6.9 per cent rise recorded in the fourth quarter of 2021.

That would mark the slowest pace of growth since mid-2020, when Covid-19 lockdowns had curtailed economic activity, and would translate to a 0.2 per cent rise compared with the previous quarter, based on a measure used by other major economies.

The US commerce department is scheduled to release the report at 8:30am Eastern Time on Thursday.

The data comes as fears mount that inflation and aggressive tightening by the Federal Reserve will trigger an economic recession. A widely used indicator of recession — the inversion of the yield curve — briefly flashed red earlier this month.

US growth is being threatened by the highest inflation in 40 years as the Russian invasion of Ukraine has driven up commodity prices, and current lockdowns in Beijing herald further supply chain issues.

The Fed has indicated that it will respond to inflation forcefully, with markets expecting a half percentage point rate rise at its next meeting in May. Investors in the futures market now expect the central bank to lift its key interest rate to 2.7 per cent by the end of the year, up from just over 0.25 per cent today.

But the effects of inflation and tighter monetary policy on first-quarter growth ought to be limited.

“It is expected that GDP will print weaker than what the actual underlying trend growth rate is, largely because of fluctuations in things like trade and inventories that are not reliable indicators of future growth,” said Eric Winograd, an economist at AllianceBernstein.

American household incomes are robust, Winograd argued, which should be evident in the personal consumption figure, forecast to have grown by 3.5 per cent in the first quarter, up from 2.5 per cent at the end of last year.

However, the strength in consumer spending was offset by the growing trade deficit, which hit a record high in March as import volumes and prices surged. The robust import demand, and change in the trade deficit, will detract from GDP, because it is a gauge of production.

A revision to how retail sales are calculated is also expected to have curtailed growth in the first quarter, and bolster GDP in the second quarter.

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