President Joe Biden really should be sweating proverbial bullets right now, because things are not at all looking good for his re-election campaign. Americans have made it abundantly clear that the issue they are concerned about the most is the economy. And with good reason because with every policy move Biden makes, things get worse, financially speaking, for the country. He’s a total disaster. As such, he should never be allowed to serve a second term. Our nation would not survive four more years of this.
According to a new report coming from CNBC, our country’s economic growth was actually much weaker than it was expected to be when 2024 kicked off, with prices rising at a much faster rate than anticipated, information from the Commerce Department revealed on Thursday.
Gross domestic product, a broad measure of goods and services produced in the January-through-March period, increased at a 1.6% annualized pace when adjusted for seasonality and inflation, according to the department’s Bureau of Economic Analysis.
Economists surveyed by Dow Jones had been looking for an increase of 2.4% following a 3.4% gain in the fourth quarter of 2023 and 4.9% in the previous period.
Consumer spending increased 2.5% in the period, down from a 3.3% gain in the fourth quarter and below the 3% Wall Street estimate. Fixed investment and government spending at the state and local level helped keep GDP positive on the quarter, while a decline in private inventory investment and an increase in imports subtracted. Net exports subtracted 0.86 percentage points from the growth rate while consumer spending contributed 1.68 percentage points.
That’s not the only bad news.
The personal consumption expenditures price index, which the Federal Reserve considers to be a vital inflation variable, went up at a 3.4 percent annualized pace for this quarter, which is the largest gain it has had in about a year and is up from 1.8 percent from the previous fourth quarter. Prices also went up at a rate of 3.7 percent which is significantly higher than the original 2 percent the Fed chose as a target. This is excluding purchases for food and energy. Officials with the Central Bank usually put their attention on core inflation as a better indicator of trends for the long-term.
The price index for GDP, sometimes called the “chain-weighted” level, increased at a 3.1% rate, compared to the Dow Jones estimate for a 3% increase.
Markets slumped following the news, with futures tied to the Dow Jones Industrial Average off more than 400 points. Treasury yields moved higher, with the benchmark 10-year note most recently at 4.69%.
“This was a worst of both worlds report – slower than expected growth, higher than expected inflation,” David Donabedian, chief investment officer for CIBC Private Wealth US went on to explain. “We are not far from all rate cuts being backed out of investor expectations. It forces [Fed Chair Jerome] Powell into a hawkish tone for next week’s [Federal Open Market Committee] meeting.”
The report from the Commerce Department comes at a time when markets have become quite anxious about the current state of monetary police in the U.S. and when the Federal Reserve might finally begin to cut the benchmark interest rate. As of now, the federal funds rate, which for those who might not know, is what banks charge one another for overnight lending, is now in a targeted range between 5.25 percent to 5.5 percent. This is the highest it’s been in over two decades.
Many investors have to make some significant adjustments to their belief in when the Fed will begin to ease off due to the rate of inflation remaining high. Right now the belief, which is mostly expressed through futures trading, is that reductions in the rate will finally start in September, with the Fed only making a cut or two during the year. The price of futures has also moved around a bit after the GDP release, with many traders noting only one cut this year.
“The economy will likely decelerate further in the following quarters as consumers are likely near the end of their spending splurge,” Jeffrey Roach, chief economist at LPL Financial, revealed. “Savings rates are falling as sticky inflation puts greater pressure on the consumer. We should expect inflation will ease throughout this year as aggregate demand slows, although the path to the Fed’s 2% target still looks a long ways off.”
Consumers generally have kept up with inflation since it began spiking, though rising inflation has eaten into pay increases. The personal savings rate decelerated in the first quarter to 3.6% from 4% in the fourth quarter. Income adjusted for taxes and inflation rose 1.1% for the period, down from 2%.
Spending patterns also shifted in the quarter. Spending on goods declined 0.4%, in large part to a 1.2% slide in bigger-ticket purchases for long-lasting items classified as durable goods. Services spending increased 4%, its highest quarterly level since the third quarter of 2021.
Again, things are looking pretty terrible economically speaking. And there does not seem to be an end in sight to the madness. Without relief for the American people, this issue is going to continue being first and foremost on the minds of voters, who will likely pull the lever for Trump. Or, at least, we hope they will.
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