US economy is hit with a double whammy (low GDP growth and high inflation)! - Part 3

US Q1 GDP: 1.4%

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

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

Q1 GDP (1st estimate) = 0.21 + 0.56 + 1.68 + (-0.86) = 1.59 (1.6)

Q1 GDP (2nd estimate) = 0.23 + 0.57 + 1.34 + (-0.89) = 1.25 (1.3)

Q1 GDP (3rd estimate) = 0.31 + 0.77 + 0.98 + (-0.65) = 1.41 (1.4)

We could see from the GDP sub-components that Consumption and Net Export continued to depress the US economic growth.  The most significant factor is that consumption is affecting the US economy greatly with its continual falls and close to 70% of the US economy is supported by consumption.

Furthermore, the US core inflation (core PCE) is still at an elevated high of over 3% which is a far cry from the US 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.