According to the Bureau of Economic Analysis (BEA), the U.S. economy grew by a mere 1.6% in Q1 of 2024, indicating a significant slowdown from Q4 of 2023, when GDP grew by 3.4%. This is particularly troubling because economists had anticipated a slowdown, but not one this significant. The economy was projected to grow by 2.5%
"Compared to the fourth quarter, the deceleration in real GDP in the first quarter primarily reflected decelerations in consumer spending, exports, and state and local government spending and a downturn in federal government spending," explains the U.S. Bureau of Economic Analysis in a press release. "These movements were partly offset by an acceleration in residential fixed investment. Imports accelerated."
GDP dipped more than expected in the first quarter of 2024 according to Thursday’s advance estimate:
— Spencer Brown (@itsSpencerBrown) April 25, 2024
-Q4 GDP: +3.4%
-Q1 GDP expectation: +2.5%
-Q1 GDP actual: +1.6%
Not only did economic growth slow down more than expected, but inflation — which Biden claims is under control and improving — surged. The price index for GDP purchases increased to 3.1% in the initial quarter of 2024, marking a significant increase from 1.9% in the preceding quarter of 2023.
Similarly, the personal consumption expenditures (PCE) price index surged by 3.4% in Q1, up from a 1.8% rise in Q4. Excluding food and energy costs, the core PCE price index saw an even steeper rise in Q1, reaching 3.7% compared to the 2% level of Q4. These figures surpass economists' expectations and exceed the Federal Reserve's target of 2%.
The troubling report caused U.S. stocks to plunge.
⚠️BREAKING:
— Investing.com (@Investingcom) April 25, 2024
*U.S. STOCKS PLUNGE, VIX SPIKES AFTER WEAK GDP REPORT; DOW TUMBLES 500 POINTS $SPY $QQQ $VIX 🇺🇸 pic.twitter.com/6onOKYqpVP
This comes on top of a recent report that the housing market experienced an overall decline, which Fannie Mae's chief economist noted is a major indicator of a looming recession. The liberal media, of course, is trying to spin the report in the best possible light and to assuage concerns about a recession. But another top economist says that the signs are indeed pointing to one.
Related: GDP Growth Slows in First Quarter While Inflation Remains High. Can You Say 'Stagflation'?
According to Nancy Lazar, an economist at Piper Sandler, the U.S. economy is currently facing a unique challenge that she described as a "bifurcated" economy, which has only happened twice before and has led to recessions both times: the energy crisis of 1978-1979 and the Great Recession of 2008. Lazar explained that while large businesses benefit from higher interest rates, favorable financial conditions, and government support, consumers are struggling with mounting debts and inflation eroding wage gains. She predicts a 53% chance of a recession.
One concern the media is conceding is that the report signals that stagflation may be coming.
“For those who do not understand what just happened, we have a weakening economy with rising inflation: The worst possible outcome for the Fed,” the Kobeissi Letter wrote on social media X.
Mohamed El-Erian, chief economic adviser at Allianz, emphasizes that any hope pinned on the recent US GDP data to alleviate pressure on US government bond yields will be completely disappointed due to another significant inflation reading.
This dual challenge of sluggish growth coupled with elevated inflation “is problematic for the economy and markets, with political and social spillovers,” the economist added.
Echoing this message, macroeconomist Craig Shapiro remarked “Weaker than expected GDP and Personal Consumption but higher than expected Core PCE Index and better labor data. That’s a stagflationary mess for folks begging for the Fed put to be activated.”
“This report was the worst of both worlds: economic growth is slowing and inflationary pressures are persisting,” claimed Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
Biden, naturally, thinks the report is good news. "Today’s report shows the American economy remains strong, with continued steady and stable growth," he claimed in a statement. "The economy has grown more since I took office than at this point in any presidential term in the last 25 years—including 3% growth over the last year—while unemployment has stayed below 4% for more than two years."
