Commentary
A frightening economic report has come out of the Commerce Department: U.S. real gross domestic product (GDP) fell at a 1.4 percent annual rate during the first quarter of the year. Suddenly, the prospect of recession has become very real.
A slowdown in the recovery was already evident, and recession is indeed on the horizon, but the first quarter’s outright GDP decline overstates the economy’s present degree of weakness.
The first quarter’s decline constitutes quite a turn from the 6.9 percent annualized real GDP growth reported for 2021’s fourth quarter. Sudden turns of this sort often suggest that the data include distortions from particulars and less that is fundamental. In this case, three of these kinds of particulars stand out: in government spending, in inventories, and in foreign trade.
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