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Why it matters: This quarterly growth will be the strongest until at least 2024.

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By the numbers: We estimated it would grow by 1.7%, so we were too optimistic.

• Consumer spending rose 3.7%
• Business investment fell 12.5%
• Residential investment fell 4.2%
• Government spending rose 4.7%

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Be smart: Growth looks to be falling for the rest of 2023.

• The economy is slowing because consumers can’t keep up with inflation anymore, even as inflation falls. Consumers have run out of savings and run up their credit card balances. Even though their wages continue growing, they aren’t growing as fast as inflation. That means inflation-adjusted spending is starting to drop, which we see in the most-recent retail data.

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Bottom line: We have mostly avoided paying a macroeconomic cost for high inflation, but the cost will finally come due soon.