GDP: el stinkeroo!


Guess what? The Dismal set overshot again: 

via WSJ:  "The U.S. economy expanded at the slowest pace in two years in the first quarter, as high energy prices helped put a damper on spending by consumers and businesses and forced the already huge trade deficit to widen."

This was the economy’s most sluggish showing since the first quarter of 2003, when economic activity expanded at a 1.9% clip. That suggests the stimulus from 2003 is fading.

"Surging prices for crude oil and gasoline helped to damp both consumer and business spending. Consumer spending, which accounts for more than two-thirds of all U.S. economic activity, rose 3.5%, lower than the 4.2% gain seen in the fourth quarter. Business investment increased 4.7% after rising 14.5% in the fourth quarter, and spending on equipment and software recorded its weakest showing in two years.

The slowdown in spending was largely expected after a weak reading on March retail sales and a 2.8% slide in demand for big-ticket manufactured goods. In Thursday’s report, demand for durable goods was flat after rising 3.9% in the first quarter."


Here’s 15 year chart showing year-over-year GDP — topping and sliding.

click for larger chart


Source:, WSJ

Even worse than the slow growth is the additional prcie inflation:  "Chain-weighted GDP price index) a very broad measure of economy-wide inflation)  increased at a robust 3.3% rate. According to the WSJ, that’s the fastest rise since an identical jump in the Q1 2001. (Last qaurter was a slower 2.3%).

Of course, none of this bodes well for the longer term macro-economic environment.


UPDATE: April 28, 2005 2:36pm

Some more good charts here


High Energy Prices Place Curb on Economic Growth
U.S. GDP Expanded at 3.1% Rate in 1st Quarter; Spending Cools Off
WALL STREET JOURNAL ONLINE, April 28, 2005 9:52 a.m.,,SB111469118040019450,00.html

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What's been said:

Discussions found on the web:
  1. malabar commented on Apr 28

    Are you sticking with your bear call or beginning to dip your toes back? Mark Hulbert in CBS Marketwatch states that sentiment is rather bearish. How do you feel about that?

    What in your opinion is the probability that Fed does not hike rates at the next meeting and how do you believe the bond and stock would react to that?

  2. fatbear commented on Apr 28

    Inflation Watch:

    FT raises cover price 50% next Monday

    old-style Greek-owned coffee shop near Carnegie Hall raised menu prices ~8%

    more weight on the bear side….

  3. alex norman commented on Apr 28

    Wal-Mart as Leading Indicator?

    Your comp of OIL index and WMT was illuminating. If the US economy is being primarily fueled by consumption, aided by low interest rates, low-cost goods from China, and soaring home prices, then WMT’s plunge should make us as wary about an upcoming economic slowdown as much as the weak recent retail sales data.

    In short, despite what PIMCO’s 2nd Q overview says, the long-awaited “handoff” between consumption and capital spending by business has apparently not happened, at least to the degree necessary to produce a fully self-sustaining recovery.

    All of which supports the argument that we are running on fumes, with the “kitchen sink” stimuli from Bush, Greenspan & Co. wearing off and the housing market apparently reaching its limit.

    WMT’s plunge relative to major indexes suggests that the markets still underestimate the impact of sustained higher oil prices on an american consumer already carrying a historically high level of debt..

  4. Just Some Dude commented on Apr 28

    Well, if you would read some Mises, everything would make sense and you all would not be surprised by this fall in GDP and rise in inflation.

  5. Restless Mania commented on Apr 29

    Friday Gatling Blog

    Buckle up. It’s that time of the week again.

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