Federal Reserve Chairman Jerome Powell has been emphasizing that the U.S. economy is "very strong" at a press conference after the March rate meeting, but data released by the U.S. Commerce Department late last month showed that in the first quarter of 2022, domestic Gross domestic product (GDP) fell at an annual rate of 1.4% month-on-month, far below market expectations of 1.1%.
This marks a sudden break in the "best since 1984" performance of the U.S. economy under stimulus policies after the outbreak of the epidemic in 2020.
The data sparked fears that U.S. growth is lacking momentum and may even be heading for a recession.
Former U.S. Treasury Secretary Lawrence Summers said recently that, summarizing the economic laws since 1950, whenever U.S. inflation exceeds 4% and unemployment rate falls below 5%, the U.S. economy will fall into recession within two years.
Up to now, inflation in the United States has exceeded 4% for 13 consecutive months, and the unemployment rate has been below 5% for 8 consecutive months. In March, inflation was as high as 8.5%, and the unemployment rate was 3.6%.
Atrophy under high base effect
Frankly, fears of a U.S. recession exist, but it would be premature to judge by single-quarter data.
Moreover, the U.S. GDP growth rate in the last quarter reached a high of 6.9%, which has been rare in decades. Under the high base effect, the contraction in the first quarter of this year is not unexpected.
In fact, if you change the statistical caliber, the US GDP in the first quarter rose year-on-year.
According to a research report by CITIC Securities, the real GDP of the United States in the first quarter increased by 3.57% year-on-year.
The U.S. unemployment rate remained at 3.6% in April.
(Xinhua News Agency)
It can be seen that the sound of a severe recession in the US economy is exaggerated.
If you look at the breakdown, one of the reasons for the decline in US GDP in the first quarter is the deficit of imports and exports.
The U.S. trade deficit hit an all-time high in March due to a surge in import volumes and prices.
For the entire first quarter, the value of U.S. exports fell by about 5.9%, while the value of imports rose 17.7%.
This difference has a large impact on overall U.S. GDP.
Moreover, the substantial increase in U.S. imports is mainly due to the substantial increase in domestic consumer demand. In other words, the American people’s material pursuit of imported services and imported goods is on the rise, and they are more willing to spend money, which is actually more confident in the economy. reflect.
Remember, consumption accounts for about two-thirds of U.S. GDP.
It can be said that as long as consumption does not collapse, the fundamentals of the US economy can be stabilized.
Data showed that U.S. personal consumption rose 2.7% in the first quarter, higher than the 2.5% growth rate in the previous quarter.
The Federal Reserve's interest rate meeting last Wednesday (May 4) decided to raise interest rates by 0.5%, which is the first time in 22 years.
(Getty Images)
Sharp monetary policy has big side effects
However, that doesn't mean the U.S. economy will continue to be strong...
For details, please read the 316th issue of "Hong Kong 01" e-Weekly Newsletter (May 10, 2022) "
U.S. GDP shrinks by 1.4% in the first quarter, is it a recession signal?
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