US economy is hit with a double whammy (low GDP growth and high inflation)! - Part 2

US Q1 2024 GDP: 1.3% (revised down from 1.6%)

Let's break the GDP down to see what had happened.

https://sg-stock.blogspot.com/2024/04/us-economy-is-hit-with-double-whammy.html

GDP growth = G + I + C + NE (net export)

Q1 GDP (previous estimate) = 0.21 + 0.56 + 1.68 + (-0.86) = 1.59 (1.6)

Q1 GDP (current estimate) = 0.23 + 0.57 + 1.34 + (-0.89) = 1.25 (1.3)

We could see from the GDP sub-components that consumption and net export had larger declines that wiped out the smaller increases in government spending and investment which resulted in the overall decline in the GDP estimate.

Moreover, the US inflation (Core PCE Q1 2024) had a significant increase (+3.6%) from the previous quarter (Q4 2023) and this is a far cry from its targeted 2%.  If this inflation is sustained for 2024, the US Fed won't reduce its fed rate in 2024 despite having a weak GDP growth.  This phenomenon (weak GDP and high inflation) is known as stagflation and is very difficult to resolve.