The Week in Review: May 1, 2023
Making Heads or Tails Out of the Latest GDP Report
Gross Domestic Product (GDP) is the economy's largest measure of goods and services. Preliminary data from the U.S. Bureau of Economic Analysis showed that GDP slowed from an annual pace of 2.6% in Q4 2022 to 1.1% in the first quarter of 2023.
Note the two-straight quarters that GDP declined in Q1 2022 and Q2 2022. Two-straight declines in GDP line up with the traditional definition of a recession. But consumer spending, which accounts for 70% of GDP, was up in both quarters.
During that period, the economy generated a robust 2.7 million jobs, per the U.S. BLS. Neither the consumer spending metric nor robust job growth would suggest the economy slipped into a brief recession last year.
Returning to the latest report, consumer spending increased from Q4’s 1.0% to a solid 3.7%. If we exclude a sharp de-stocking of inventories, which lopped 2.3 percentage points off GDP, growth in Q1 was solid.
Consumer spending, however, appears to have been distorted by very strong numbers in January, which offset weakness in Q4.
If we lump Q4 and Q1 together, it might be fair to say that the end of last year probably wasn’t as strong as it appears, while Q1 probably wasn’t as weak as the top line suggests.
As we move forward, it’s the tale of two economies.
People are still traveling and going out to dinner, and the economy is generating new jobs, but high-profile layoff announcements from large firms signal demand is softening in some areas.
Last week’s story in the Wall Street Journal bears this out. Falling diesel prices relative to gasoline mean fewer trucks are carrying goods across the country.
Please let me know if you have questions or would like to discuss any other matters.
Two for the Road
Congress today is older than it has ever been. Across all United States senators and representatives, the median age of the 118th Congress is 59 years old. The median senator is 65 years old, a record high; the median representative is about 58. - FiveThirtyEight, April 3, 2023
The United States is now the biggest supplier of crude oil to the European Union, providing 18% of the bloc’s crude imports. Russia accounted for as much as 31% of EU oil imports until the end of January 2022. - CNN, March 28, 2023
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