The latest economic data paints a troubling picture, suggesting that stagflation may indeed be on the horizon. The second reading of US Q1 2024 GDP has plummeted to just 1.3%, a sharp decline from the previously reported 1.6% growth noted a month earlier and a stark contrast to the robust 3.4% expansion in Q4 2023.
What does this mean for the economy? It indicates a significant slowdown in growth, driven by a notable downturn in consumer spending, which contracted by -2.0% compared to the previously reported +2.5% increase. At the same time, the Core PCE Price Index has surged to 3.6%, a substantial jump from its 2.0% reading in Q4 2023.
These developments present a serious dilemma for the Federal Reserve. Are they trapped? Consider the troubling statistics:
- GDP growth slowing to a meager 1.3% in Q1.
- Median home prices hitting an unprecedented high of $434,000.
- Inflation persisting above 3% for 37 consecutive months.
- Federal deficits swelling to a staggering $2 trillion.
- National debt soaring to a record $34.6 trillion.
- A concerning loss of 600,000 full-time jobs over the past year.
Sources:
Has stagflation been confirmed?
Second reading of US Q1 2024 GDP just fell to 1.3%, below the initially reported growth of 1.6% last month.
This is ~60% less than the 3.4% growth seen in Q4 2023.
This downward GDP revision primarily reflected slower consumer spending of… pic.twitter.com/q6z2bNd1yj
— The Kobeissi Letter (@KobeissiLetter) June 1, 2024
The US labor market looks as if the economy was in a recession