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Thursday, April 25, 2024

US economy is hit with a double whammy (low GDP growth and high inflation)!

US Q1 GDP: 1.6% (Lower than expected)

Let's break the GDP down to see what had happened.
GDP growth = G + I + C + NE (net export)
Q1 GDP = 0.21 + 0.56 + 1.68 + (-0.86) = 1.59 (1.6)

We can immediately see that there's significant declines in G, C and NE when compared with the previous Q4 below.

Q4 2023 GDP Growth (3.4) = 0.79 (G)+0.15 (I)+2.2 (C)+0.25 (NE) = 3.39(3.4)

While the US GDP growth was weakening in Q1 2024, the US inflation was rising significantly in the same period.  This means that the US Fed can't reduce its rates to boost its GDP growth.  There is a possibility now that the US is facing a stagflation situation which is very difficult to resolve.

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