Economic Turmoil Unveiled: GDP Woes, Small Business Struggles, and Inflation Fears Loom…

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As we delve into the economic landscape, ominous signals are emerging, painting a bleak picture of the future. A nowcast from @MacrobondF, citing Econforecasting, indicates a meager GDP growth of only 1% in Q4, with a sluggish start at 0.8% through the first two weeks of January. The US NFIB small business actual sales changes reveal a concerning 3-month moving average drop of -15%, signifying a challenging environment.

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The US real GDP, while at 2.9% YoY, shows an unsustainable divergence, hinting at potential downside risks to economic growth. Jamie Dimon’s skepticism about expected rate cuts and a soft landing in 2024 adds to the growing apprehension.

Dimon’s cautionary words echo concerns about the inflationary impact of a $2 trillion fiscal deficit, coupled with significant policy shifts like the infrastructure and IRA act, the green economy focus, global remilitarization, and trade restructuring. This scenario bears an eerie resemblance to the inflationary struggles of the 1970s.

Inflation fears are resurfacing, fueled by the Fed’s talk of rate cuts and the potential for a price surge. However, let’s unravel the complexities of inflation and question whether this anticipated revival is grounded in reality.

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Contrary to common belief, rate cuts by the Fed don’t automatically translate into higher consumer prices. Inflation is a multifaceted phenomenon with factors beyond central bank actions. Remember the term ‘transitory disinflation’? The notion that the disinflation observed towards the end of 2022 would be temporary has proven inaccurate, raising questions about the effectiveness of current economic strategies.