An analysis released Thursday by Nationwide on recent weaker-than-expected U.S. economic growth data for the first quarter of 2024 tried to calm some fears of a deeper economic downturn.

Nationwide Senior Economist Oren Klachkin said the topline 1.6% annualized GDP rate increase reported this week by the U.S. Bureau of Economic Analysis “overstates weakness in the economy” and indicated those numbers could be revised later.

“First-quarter growth will likely be revised higher in the next iteration and we believe there is plenty of momentum to keep it growing this year,” Klachkin wrote in the analysis. “We think the economy will grow north of 2% in 2024, with demand and supply moving into a better alignment and lingering post-pandemic distortions fading over the course of the year.”

But Klachkin notes that the U.S. “locomotive chugs at a slower speed.”

He wrote that GDP readings – final sales to domestic purchasers and final sales to private domestic purchasers – signaled solid expansion. The analysis says final sales to domestic purchasers, which excludes inventories and net exports, rose 2.8% after a 3.5% increase in the fourth quarter of 2023. Final sales to private domestic purchasers, not including inventories, net exports and the government sector, edged lower to 3.1% after a 3.3% gain at the end of 2023.

Klachkin’s analysis credits consumer spending as the main driver of growth in the U.S. economy, rising 2.5%. The metric was pushed higher due to stronger spending on services while goods outlays fell slightly, the analysis says.

According to Klachkin, that could be a sign that elevated interest rates took a toll on spending for big-ticket items.

“While the warning signs of low savings rates and rising delinquencies will linger, we think positive income growth and a willingness to tap credit lines will keep consumers spending this year. That said, moderating income gains over the course of 2024 will gradually weigh on consumers’ willingness to spend,” Klachkin wrote.

Residential investments posted its third-straight quarterly gain in the GDP report, up 3.3% annualized as home construction activity picks up. Business investment grew 2.9%, led by intellectual property and supported by a “tepid increase” in equipment spending that was partly offset by modestly weaker structures outlays, Klachkin says.

“Elevated borrowing costs and tight lending standards will pose headwinds, but a supportive fundamental backdrop will keep capital expenditures from retrenching,” he wrote. “Also, ongoing labor market tightness will drive companies to invest in productivity-enhancing efforts and brighten long-term growth prospects.”

The Federal Reserve will not be in a place to lower the benchmark interest rates following the GDP report, according to Klachkin. The Federal Reserve Chair Jerome Powell and other policymakers have said they likely won’t move to lower interest rates until the economy achieves the Fed’s 2% annual inflation target.

In an analysis of U.S. inflation released Friday, Nationwide Senior Economist Ben Ayers said inflation readers through March were “hot.”

Including food and energy, the all-items personal consumption expenditures price gauge released on Friday by the U.S. Department of Commerce increased 2.7%, compared with the 2.6% estimate, according to CNBC.

“Given the momentum for the economy and prices, we don’t expect the Fed to strongly consider easing monetary policy until its September meeting at the earliest,” Ayers wrote. “There is also a risk that the further economic resilience pushes off any rate declines until 2025, a key downside risk for growth next year.”

The lower-than-expected GDP number sent U.S. stocks lower on Thursday before beginning a rebound Friday. According to a report from CNN, the Dow fell by 375 points, or 1%, at the close of markets Thursday, and the S&P 500 was down 0.5%.

As of 12:14 p.m. Friday, the Dow was up 228.51 points, or .60%, at 38,314.31.