Economy Shrunk Even More in First Quarter than Experts Thought
The first quarter was even worse than initially thought or reported.
First-quarter GDP shrunk by 1.5% which is even worse than the 1.3% estimated by Dow Jones or the 1.4% that was initially reported by the government.
The pullback in GDP represented the worst quarter since the pandemic-scarred Q2 of 2020 in which the U.S. fell into a recession spurred by a government-imposed economic shutdown to battle Covid-19. GDP plummeted 31.2% in that quarter.
The Federal Reserve hopes to put the brakes on rapidly skyrocketing inflation by increasing interest rates, those increases could lead to another quarter of stunted or negative growth. Two negative quarters in a row would signal a recession. The Biden recession.
Analysts vary in their expectations for the second quarter. Some expect upwards of 3.3% growth, other a muted increase of just 1.8%. Some believe that the Fed’s actions could easily push the economy into negative territory.
“We’re going to have two consecutive 50 basis point hikes over the next few meetings. If it’s less, the market will think the Fed doesn’t take [the economic situation and high inflation] seriously. If it’s more, [the market] will think it’s worse than we thought,” said David Rubenstein, co-founder and co-chairman of the Carlyle Group, during a panel at the World Economic Forum in Davos earlier this week.
A horrendous first quarter, the stock market in bear territory, inflation at 40-year highs, and a slew of ill-conceived energy and economic policies from the White House all point to a very rocky 2022.
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