Final Q1 GDP -1.6%; What’s in store for Q2?

Wednesday, June 29, 2022

This morning’s economic data comes in the form of a revision First Quarter Gross Domestic Product (GDP) digits, which is the final reading. In the headline, we see this increasing slightly towards negative: -1.6% versus -1.5% in the last print. This is the first negative quarter of GDP growth since the tumultuous Covid-related shutdown in the second quarter of 2020.

At the time, the two months of negative GDP growth (Q1 2020 was -5.1%) was a technical recession, but that was it – very short-lived. Depending on how Q2 plays out (and Q2 GDP numbers won’t start coming out for another month), particularly in terms of growth in the energy sector, we could see our second technical recession in two year.

Other subtitle numbers look like this: final demand +2.0% (before +2.7%), consumption +1.8% (+3.1% last time), gross domestic income +1 .8% (+2.12% before). Quarter-over-quarter core spending (excluding volatile food and energy prices) edged up to +5.2% from a lower-revised +5.0%. This is still a high figure, but fortunately far from the +6.1% observed in June of last year.

Tomorrow we will see the full compliment of Personal Consumption Expenditure (PCE) figures – well known as the Fed’s favorite inflation barometer – for the month of May. Last time we saw year-over-year numbers of +6.3% on the stock, +4.9% on the core. This base figure is lower than the +5.2% observed in March. Core PCE inflation month-over-month is expected to be +0.4% – higher than +0.3% in the prior month.

Over the Atlantic this morning, the last European Central Bank (ECB) conference is just beginning at this time. ECB President Christine Lagarde, Bank of England President Andrew Bailey and US Fed President Jerome Powell will address central bankers in the eurozone and beyond. If here in the US we are worried about recessionary conditions, the EU – with its proximity to the war in Ukraine, among others – is almost certainly headed for negative growth.

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Maria R. Newman