The latest U.S. economic data just hit and it is far worse than most people realize. Growth is stalling, inflation refuses to disappear, and traders are now pricing in a Federal Reserve rate cut in September. The economy is slowing faster than anyone expected.
The Commerce Department revised the fourth quarter GDP to 0.7 percent annualized, a sharp drop from the prior 4.4 percent and well below consensus estimates. PCE inflation came in at 2.8 percent year over year, slightly below expectations, but still above the Fed’s 2 percent target. Core PCE rose 3.1 percent year over year showing inflation remains persistent.
Durable goods orders were flat at 0 percent compared to a forecast of 1.1 percent. Labor numbers last week showed weaker job gains than expected and unemployment ticking higher. Business investment is fading, wage growth remains weak, and consumption shows signs of strain.
Put together, this means slowing output, persistent inflation, weakening investment, and softening labor markets. Traders now expect the Fed’s first rate cut not until September, leaving little room for policy maneuvering.
Ordinary Americans will feel this immediately. Jobs will be less secure, wages will struggle to keep pace with prices, and borrowing will become tighter. Inflation is sticking while the economy is losing steam.
The numbers are clear. Growth is collapsing. Inflation is still high. Policymakers are trapped. The slowdown has begun and the consequences are only going to get sharper from here.