The U.S. economy grew at a 1.6% annualized rate in the first quarter of 2024, the Commerce Department said on Thursday.

Why it matters: The economy slowed significantly from the end of last year—a sign the nation may be entering a more moderate period of growth.

• Analysts had expected a 2.5% pace of first quarter growth. The GDP number undershot those estimates as it was dragged down by companies depleting their inventories and a surge in imports.
• By comparison, gross domestic product (GDP) increased at 3.4% annual rate in the fourth quarter of 2023 and rose 4.9% in the three-month period before that.

Zoom in: The latest GDP report, which offers the broadest snapshot of the economy's health, reflected resilient consumer activity that has kept the economy humming in recent months.

• Consumer spending rose at a 2.5% annualized rate in the first quarter, cooling off a bit from the 3.3% seen in the previous quarter.
• Housing activity rebounded sharply: Residential investment soared by 14% last quarter, compared to the 2.8% in the final quarter of 2023.

The big picture: The latest GDP report is the freshest sign that the economy is cooling off, even as inflation stays firm.

• Stickier inflation has pushed off expectations about when and how much the Federal Reserve will slash interest rates this year.
• Instead, Fed officials have warned in recent weeks that defeating inflation may require the central bank to hold interest rates at a two-decade high for a longer period of time.

Editor's note: This story was updated with a new chart.