The government reported the country’s gross domestic product contracted at an annualized pace of 1.4% in Q1.
Demand was so high that domestic manufacturing couldn’t keep up, prompting businesses to buy more goods from abroad, according to Amherst Pierpont senior economist Stephen Stanley on Wednesday.
Reporter: "How concerned are you about a recession, given the GDP report today?"
President Biden: "I'm not concerned about a recession. I mean, you're always concerned about recession, but the GDP, you know, fell to 1.4%." https://t.co/7ZREZVdqqQ pic.twitter.com/cJvsg1xmMC
— The Hill (@thehill) April 28, 2022
Research and Analysis
According to Joe Brusuelas, research director for RSM US LLP, the release of the GDP figures demonstrates what a boiling economy looks like.
A quarterly report of negative growth does not imply the United States economy is in a recession.
Instead, that assessment is made by a group of experts at the Bureau of Economic Analysis, who consider data gathered over several months to reach their conclusion.
In a note published on Wednesday, Wells Fargo analysts Jay Bryson and Shannon Seery said in a written note, “the likelihood of a downturn next year is not small.”
According to Tony Fratto, a longtime White House spokesman for President George W. Bush who is now a consultant at Hamilton Place Strategies, this is basically what one might expect or want to see as authorities attempt to cool an overheating economy.
When there is full employment and inflation, “the medicine is to take the foam out of the economy for a short period,” Fratto said on Wednesday.
It is pretty perilous for the White House to have negative growth for even one quarter during an election year, especially during this time in a midterm election year.
Moreover, Democrats must be prepared to deal with Republicans who are eager to hammer them over the economy’s slowing, which, when combined with high prices and interest rate rises, may begin to seem like a malaise, he explained.
His assessment of the Republican Party was, “they’re not going to start speaking about inventories.”
“They’re only going to be talking about how the Democrats’ massive spending created hyperinflation and a downturn in the economy and how things are only going to get worse from here on out.”
Republicans were quick to react to the news.
According to Rep. Kevin Brady (R-Texas), who chairs the House Ways and Means Committee, “speeding up inflation, a labor crisis, and the looming risk of a substantial recession are the signature economic woes of President Biden and will probably get worse.”
Thanks President Biden for the negative GDP -1.4% report this morning! It wasn't Putin's fault.
— Gunther Eagleman (@GuntherEagleman) April 28, 2022
The top Biden administration source cited a tweet from Jason Furman, the former chair of President Obama’s Council of Economic Advisers, on Wednesday.
He explained why technical difficulties in the first quarter obscured the economy’s fundamental strength. However, according to one analyst, this type of rhetoric from the White House would be ineffective.
Jason Furman put out a 12-tweet thread to clarify why the country’s economy is better than it appears. He noted this is because the GDP is already an abstract concept that people do not intuitively understand, unlike inflation.