U.S. economy contracts as GDP plummets to -1.4% for Q1

The U.S. economy shrank last quarter into negative growth, the first contraction since the early days of COVID lockdowns in 2020, alongside a ballooning trade deficit and softer inventory growth.

U.S. economy contracts as GDP plummets to -1.4% for Q1

Olivia Rockeman for Bloomberg:

Gross domestic product fell at a 1.4% annualized rate after a 6.9% pace of growth at the end of 2021, the Commerce Department’s preliminary estimate showed Thursday. The median forecast in a Bloomberg survey of economists was for a 1% increase.

Together, net exports and inventories subtracted about 4 percentage points from headline growth.

Against a backdrop of quicker inflation, the figures will likely keep Federal Reserve monetary policy geared for a half-point hike in interest rates next week. Nonetheless, Fed officials need to balance that policy tightening with risks associated with building price pressures.

Inflation

Jeff Cox for CNBC:

The negative growth rate missed even the subdued Dow Jones estimate of a 1% gain for the quarter. GDP measures the output of goods and services in the U.S. for the three-month period.

Prices increased sharply during the quarter, with the price index for gross domestic purchases surging 7.8% in the three-month period, following a 7% gain in the fourth quarter of 2021.

The decline in growth came due to a deceleration in private inventory investment, which helped propel growth in the back half of 2022. Other restraints came from exports and government spending across state, federal and local governments, as well as rising imports.

An 8.5% pullback in defense spending was a particular drag, knocking one-third of a percentage point off the final GDP reading.

Consumer spending held up fairly well for the quarter, rising 2.7% as inflation kept pressure on prices. However, a burgeoning trade deficit helped shave 3.2 percentage points off growth as imports outweighed exports.

The personal consumption expenditures price index excluding food and energy, a preferred inflation measure for the Fed, rose 5.2% in the quarter, well above the central bank’s 2% inflation target.

MacDailyNews Take: So predictable.

‘Tis best to get a handle on inflation, if you know how, while you still can.MacDailyNews, May 11, 2021

Earlier this year, Interactive Brokers founder Thomas Peterffy said, “Inflation is 7% — 1% or 2% [in interest rate hikes] doesn’t mean anything. If they really wanted to stop inflation, they would have to raise rates to 4%, 5%, 6%.”

Inflation is repudiation. — Calvin Coolidge

When a business or an individual spends more than it makes, it goes bankrupt. When government does it, it sends you the bill. And when government does it for 40 years, the bill comes in two ways: higher taxes and inflation. Make no mistake about it, inflation is a tax and not by accident. — Ronald Reagan

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15 Comments

  1. When an oligarch spends hundreds of millions on unattended drop boxes that lack a chain of custody and sets them on every urban street corner in Democrat districts in order to swing a U.S. presidential election to install a globalist establishment puppet (with dementia, no less), this is what you get.

    What you are seeing is the result of Democrat ideas in action.

    Now that laws have been passed to prevent the BUYING OF ELECTIONS BY OLIGARCHS in enough places in the U.S. to approach some semblance of election integrity, the 2022 U.S. Midterm Elections this November will be GLORIOUS!!! 🥂🥂🥂

  2. Thank goodness it is all Trump’s fault, Covid’s fault, and Putin’s fault. So glad we have Joe leading the way forward to a better and brighter (and more expensive) tomorrow!

    1. No, no! Trump is just one of the great catastrophes, all right, not the least. His influence has been terribly harmful and has almost brought democracy to its knees, but the disease of money has plagued the country since long before that.

      1. Oh do tell us (in at least a little detail) how “terribly harmful” Trump’s influence has been. How exactly did he “almost bring democracy to its knees”? Give us a few examples of why he is a great catastrophe. While you are at it, could you please point out a few ways the US has improved since Joe (was) moved into the WH. Appreciative it!

        1. Alex is the same guy that, just a couple of days ago, pushed along the Trump “drink bleach” reco. So no…even if he did supply some “terribly harmful” info, it’s likely to be bravo sierra.

          Besides, he apparently likes living in the current great catastrophe.

          1. Dumb megalomaniac billionnaire taking his lies for reality. But, apparently, some millions of Americans love to follow one of the most dangerous and gross clown to have stolen the title of “president”. A pitty, a shame for humanity!

        2. @ trumpet:

          2019: new deficit record, disrupted trade, acted extremely slowly on the pandemic, left US companies with tons of uncertainty as the administration did everything possible to undermine decades of policy by releasing memos and tweets instead of proper legislation.

          In the wake of that, Putin drove the WORLD inflation level over 7% with his offensive war, further disrupting already stressed trade and energy supplies.

          Is there any other nation navigating these turbulent waters better than the current US administration? If you think so, should the comparative economic data instead of the incessant divisive GOP propaganda.

          By the way, Obstructionist McConnell will do everything possible to ensure DJT never enters public office again. As corrupt as he is, even he knows what a disaster DJT was.

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