GULP.
“Worse than thought” GDP is actually different from “worse than expected” GDP as this is the second estimate of GDP and not the first. Or something:
First-quarter GDP declined 1.5%, worse than thought; jobless claims edge lower https://t.co/vtVi9Ywxyt
— CNBC (@CNBC) May 26, 2022
From CNBC:
First-quarter gross domestic product declined at a 1.5% annual pace, according to the second estimate from the Bureau of Economic Analysis. That was worse than the 1.3% Dow Jones estimate and a write-down from the initially reported 1.4%.
And this makes Q1 2022 “the worse quarter since the pandemic-scarred Q2 of 2020”:
"The pullback in GDP represented the worst quarter since the pandemic-scarred Q2 of 2020."https://t.co/5eO2Knna06
— Tom Bevan (@TomBevanRCP) May 26, 2022
But, don’t worry. . .
The AP says this “1.5% drop in GDP does not likely signal the start of a recession”:
BREAKING: The U.S. economy shrank in the first three months of the year even though consumers and businesses kept spending at a solid pace, the government reported. Last quarter’s 1.5% drop in GDP does not likely signal the start of a recession. https://t.co/LDCf6MnK5I
— The Associated Press (@AP) May 26, 2022
At least not yet, anyway:
Technically right. One more consecutive negative quarter would signal the start of a recession. https://t.co/H8a6ojsTha
— Noah Rothman (@NoahCRothman) May 26, 2022
Now, not to rain on the AP’s parade, but there ARE signs that a recession is coming:
Gas prices have soared so high that the US is now seeing demand destruction ahead of the summer driving season https://t.co/mp0Z9dgTcq
— Markets Insider (@MktsInsider) May 25, 2022
And big-name money managers are warning “the risk of recession has increased”:
The risk of a recession has increased and markets are likely to remain volatile, Fidelity International CEO Anne Richards says — the latest dire warning on the outlook at #wef22
Follow updates from Davos ⬇️ https://t.co/skHC6J6Xo9
— Bloomberg (@business) May 26, 2022
Does anyone think oil and food prices are coming down anytime soon?
Kyle Bass says U.S. will be in a recession in coming year, with food and oil prices still climbing https://t.co/dg0rCIcDwj
— CNBC (@CNBC) May 26, 2022
Lawrence Summer is sounding the alarm as well:
I have been eagerly awaiting @USCBO forecasts of the economy & budget for 40 yrs. I assumed that having completely missed inflation in 2021/22, @USCBO would revise its models to recognize that the current labor market was unsustainably hot & that adverse supply shocks were likely
— Lawrence H. Summers (@LHSummers) May 26, 2022
This is the first year that I would characterize the @USCBO forecast as highly implausible.
For @USCBO to go off the rails is very sad at a time when respected technocratic expertise of the kind it has traditionally provided has never been more important.
— Lawrence H. Summers (@LHSummers) May 26, 2022
There is enormous uncertainty about the future. Any part of the forecast could prove right. But it is hard to see how the forecast as a whole could play out. @USCBO’s GDP forecast assumes rapid GDP growth.
— Lawrence H. Summers (@LHSummers) May 26, 2022
@USCBO unemployment forecast assumes moderate growth and its inflation forecast assumes collapsing demand.
— Lawrence H. Summers (@LHSummers) May 26, 2022
Given the negative growth in Q1, @USCBO is predicting above 4 percent growth for the rest of the year. I can’t imagine why given all the recent indicators.
— Lawrence H. Summers (@LHSummers) May 26, 2022
Yet along with 4 plus percent growth, @USCBO are calling for unemployment to rise, contra to Okun’s law, and inflation to fall, even as the economy grows faster than potential.
— Lawrence H. Summers (@LHSummers) May 26, 2022
It gets even less plausible in 2023 as growth exceeds potential again, yet unemployment rises and inflation collapses.
— Lawrence H. Summers (@LHSummers) May 26, 2022
Overall, the @USCBO is the last holdout on team transitory believing that with continuous sub 4 percent unemployment rapid growth and negative real rates inflation will fall all the way from the .8 range to the target 2 percent range.
— Lawrence H. Summers (@LHSummers) May 26, 2022
I hope they are right and they certainly could be. But my view would be the @USCBO forecast defines the optimistic edge of possibility not the most likely outcome. They make last fall’s @federalreserve look like a collection of grim realists.
— Lawrence H. Summers (@LHSummers) May 26, 2022
***
Related:
THUD: Q2 GDP growth at just 6.5% vs. 8.4% expectations
Join the conversation as a VIP Member