Oddbean

The economy seems weaker than advertised and inflation is still running hot—it’s the ‘worst of both worlds’ ========== New data reveals weaker economic growth and higher inflation in the US. Real gross domestic product (GDP) rose just 1.6% from a year ago in the first quarter, well below economists' forecast of 2.5% growth. The core personal consumption expenditures (PCE) price index, the Federal Reserve's favorite inflation gauge, surged from 2% to 3.7% in the first three months of this year. The spike in core inflation, particularly in the services sector, is a setback for the Fed, which has been hoping for inflation to fade so they can cut interest rates and boost the economy. Economists predict that the Fed's favorite inflation gauge will likely rise to 2.8% when March's data is revealed, forcing central bank officials into a more hawkish position. Despite fading support from fiscal stimulus and weaker spending on goods, economists still expect Fed rate cuts this summer. However, investors seem less enthusiastic about the chances of market-juicing rate cuts, as the stock market dropped after the GDP report was released. Some economists argue that the US economy could be facing stagflation, a scenario with weak growth and high inflation. The weak GDP data has some caveats, such as rising private domestic demand and spending on services, which indicate underlying strength in the economy. These caveats may keep the Fed from lowering interest rates for the time being. #UsEconomy #Inflation #GdpGrowth #FederalReserve #InterestRates https://fortune.com/2024/04/25/high-inflation-low-economic-grow-worst-of-both-worlds-gdp-report/