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GDP Declines 1.4% in First Quarter of 2022 Sounding Recession Bells

Economists missed the mark badly as GDP shrunk along with real final sales.
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GDP numbers from BEA, chart by Mish

GDP numbers from BEA, chart by Mish

Chart Notes

  • Real Gross Domestic Product (GDP) decreased at a seasonally-adjusted annual rate (SAAR) of 1.4 percent in the first quarter of 2022 
  • Real means inflation adjusted.
  • In the fourth quarter, real GDP increased 6.9 percent SAAR.
  • Real GDP declined 0.4 percent at a seasonally-adjusted but not annualized rate.
  • Real final sales declined 0.6 percent SAAR in the first quarter.

That last bullet point is the most important one. 

Real final sales are the bottom line measure of the economy. The rest is inventory changes that nets to zero over time.

A Word About Imports 

Real GDP in Billions of Dollars 2022 Q1 

GDP numbers from BEA, chart by Mish

GDP numbers from BEA, chart by Mish

The above chart puts perspective on inventory growth. Real final sales have not kept up with inventories.

Huge Miss by Bloomberg Economists 

  • GDP: Economists' Consensus +1.1 Percent vs -1.4 Actual
  • Personal Consumption Expenditures: Economists' Consensus +3.4 Percent vs +2.5 Actual

Despite all the warning bells, economists missed the mark badly. 

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Worse yet, consumer spending was solid, despite the miss. 

What happens when consumer spending goes to hell with the demand destruction due to rising mortgage rates and the falling stock market? 

The Fed Searches For the Neutral Interest Rate, Where the Heck Is It?

Meanwhile, The Fed Searches For the Neutral Interest Rate, Where the Heck Is It?

Two rate hikes of a half-point each are penciled in for May and June. The December consensus bet based on actual trades is 2.75% to 3.25%.

We will not get there. 

It's possible a recession has already started!

This post originated at MishTalk.Com.

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