Don’t Worry About GDP Right Now: Wait for Normalization

2
79

There was good and bad news in today’s GDP report. President Trump said the tariffs are stirring investments and that is what the statistics show.

The bad news is Q1 GDP printed -0.3%, worse than the -0.2% expected and the first negative print since Q1 2022, when the economy was reportedly in a recession.

According to Zero Hedge, the good news is that the drop was supposed to be much worse. Indeed, if one examines the components of today’s GDP print, one finds that the number was unexpectedly strong, if one strips out the two negative components: net trade and government.

Investments are exploding. We knew tariffs would be a negative for a time, but that will change as investments come into the US. Now Congress has to pass that big, beautiful bill. Snails are speedy next to them.

EJ Antoni points out that consumer spending greatly outpaced government purchases since 2022.

According to Zero Hedge, as shown in the chart below, Q1 GDP comprises the following components:
  • Personal Consumption 1.21%, down from 2.70%, but translating into an annualized Personal Consumption print of 1.8%, much higher than the 1.2% expected
  • Fixed investment jumped to 1.34%, up from -0.2% and the highest since Q2 2023, as the BEA finally starts tracking data center investment correctly
  • Change in private inventories surged 2.25%, as expected, on the pre-tariff restocking; this number was up from a -0.84% drop last quarter and is expected to reverse in coming quarters as inventories are sold off.
  • Government spending was a negative-0.25 %, the first negative print for Joe Biden’s favorite “plug” to push GDP higher since 2022.
  • Finally, and most importantly, net trade (exports less imports) was a whopping 4.830% hit to the final GDP number, a 5% swing from the +0.26% contribution in Q4. This was entirely the result of soaring imports (of which gold was about half) in Q1 which hit GDP by a near record 5.03%. Just like inventories, this number will now reverse in coming quarters as tariff frontrunning ends and is reversed.

You can comment on the article after the ads and subscribe to the Daily Newsletter here if you would like a quick view of the articles of the day and any late news:

PowerInbox
5 1 vote
Article Rating
2 Comments
Newest
Oldest Most Voted
Inline Feedbacks
View all comments
Anna Strong
20 days ago

Just as they lie about the polls, they never tell the truth, the whole truth about anything Trump related! Facts be damned, just twist the narrative to make Trump appear in bad light about everything!

Anonymous
20 days ago
Reply to  Anna Strong

The ‘enemy within’ and their ‘mouthpiece’, the ‘legacy fake media’, are alive and well…