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Not Goldilocks: Core Inflation Overshoots In Mixed US GDP Report
The US economic expansion slowed meaningfully over the first three months of 2024, data released on Thursday suggested.
The 1.6% pace, while still healthy, was the most tepid since 2022's (non)recession and counted as a very large miss. Consensus expected 2.5% from the advance read on headline growth.
It's fair to call this a surprise. The last update on the Atlanta Fed's GDPNow tracker was 2.7%, for example, and the domestic macro narrative throughout Q1 revolved entirely around an ongoing ec
The three bears may have found their way home at last ..oh, poor Goldilocks and all her drama!
… and given how long they’ve been fasting, those bears are hungry!
Today’s graphic illustrated this article perfectly. I knew where this article was going to go before I even read the headline.
10 years ago, the concern was the old folks were being pushed out the risk curve as the speculators had free money.
There are always different bells and whistles in an economy. Money market income does feel like free money.
This “old (er) folk” is today (finally) experiencing the world of interest rates as he remembers it to have been in his youth. So the years of saving and planning are panning out as promised.
Regardless of the merit or lack there of of the above…
if and when the Fed LOWERS, will lowering have an inordinate or unanticipated
effect?
Easing now may soften a landing for many. I tend to think that this may show currently why the 80s wound up being so bad.
But the Fed is scared to have interest rates act like a yo-yo.
2% inflation may have been a happy accident historically or you may need to slow to no growth economy.
MMT alleges that inflation could be fought with higher interest rates and higher taxes. Applying taxes in our political system seems to be a nonstarter. Some fools used to lower taxes into inflation.
STAGFLATION
Or we could raise taxes and lower interest rates. Not to sound like a Marxist, but the higher interest rates are affecting the working man and those lower in the food chain. Lower taxes and higher interest rates only helps the rentier class at this point.
Scanning the advance GDP report, some interesting (to me anyway) things. All %s are QOQ change annualized, in 2017 dollars (from Table 1 and calc’d from Table 3)
– Increase in non-residential fixed investment +5.3% led by software +11.3%
– Increase in gross residential fixed investment, +13.9%
– Decline in personal goods consumption -0.4% led (down) by motor vehicles -9.9%, increase in services +4.0% led (up) by healthcare +5.5%
– Increase in imports,+7.2% led by services, and slower increase in exports, 0.9%.
– Decline in Federal spending esp defense -0.6% and slower state and local spending +2.0%
In contribution to pct change in GDP (table 2), comparing 1Q to 4Q, largest negative swings were goods (flipped from +ve to -ve), net exports (ditto), and government spending (smaller +ve than last qtr) while positive swings were fixed investment (larger +ve than last qtr) and services (larger +ve). Inventories were about as -ve as last qtr.