The U.S. economy is in "trouble": GDP growth is negative, prices are soaring

[Looking at the United States] The US economy is in "trouble": GDP growth is negative, prices are rising like crazy

　　China News Service, April 29 (Reporter Li Jinlei) The U.S. economy is in trouble: GDP has unexpectedly shrunk, but prices have gone crazy.

Anti-stagnation, or anti-inflation, tests the US economy.

On April 12, local time, a car passed by a price sign at a gas station in San Mateo County, California.

Photo by China News Agency reporter Liu Guanguan

GDP shrinks unexpectedly in the first quarter

　　Just when the market generally expected that the U.S. GDP growth rate in the first quarter was above 1%, the actual data released by the U.S. Department of Commerce was eye-popping.

　　Data show that

　　The US Consumer News and Business Channel (CNBC) analysis pointed out that the US GDP unexpectedly fell by 1.4% in the first quarter, marking a sudden reversal of the US economy's best performance since 1984.

　　The economy is going down, but prices are rocketing along the way.

In March, the U.S. consumer price index (CPI) and producer price index (PPI) expanded to 8.5% and 11.2% year-on-year, respectively, hitting new highs in 40 years and history respectively.

　　Skyrocketing prices are plaguing American consumers.

The National Economic Survey released by foreign media shows that Americans' pessimism about the economy has reached the lowest point since the Great Depression: 47% of Americans believe that the US economy is performing "very badly", which is the highest value since 2012, only Seventeen percent said the U.S. economy was doing well or well, the lowest level since 2014.

Data map: Americans shopping in supermarkets.

Photo by China News Agency reporter Liu Guanguan

Why did the U.S. economy turn down?

The underperformance of net exports, inventory investment, and government spending was cited as the main reason for the U.S. economic contraction in the first quarter.

　　Among them, net exports dragged down economic growth by 3.2 percentage points in the quarter, marking the seventh consecutive quarterly decline in this indicator.

U.S. private inventory investment dragged down economic growth by 0.84 percentage points in the quarter, a significant contraction from the previous quarter.

Federal government spending fell 5.9%, and state and local government spending also fell 0.8%.

　　Bai Ming, deputy director of the International Market Research Institute of the Ministry of Commerce, told Zhongxin Finance that the appreciation of the U.S. dollar affects exports, and due to the impact of the epidemic, the purchasing power of many countries is declining, external demand is insufficient, and the United States' restrictive policies on many countries are also unfavorable for exports. , Under this circumstance, it is really difficult to be excited about US exports.

　　Jia Kang, the founding director of the Huaxia New Supply Economics Research Institute, also pointed out to Zhongxin Finance that although the United States has resumed work and production some time ago, the competitiveness of its export products in the international market is not good.

　　According to the research report of CICC, from the perspective of sub-items, agricultural products, energy commodities, and non-durable goods in consumer goods have experienced the largest decline in exports.

The first two may be affected by higher U.S. food and energy prices, which attract companies to sell domestically.

In addition, it may also be related to the fact that the US's own supply capacity has not yet recovered.

　　The research report believes that the weak inventory investment has exceeded expectations, and the process of replenishing inventory is still rough.

Government spending fell for the second quarter in a row, pointing to the gradual fading of post-pandemic fiscal stimulus.

Due to high inflation, the Biden administration's fiscal stimulus policy is difficult to implement, so the fiscal contribution to U.S. GDP growth in 2022 is likely to be negative.

　　In Bai Ming's view, after the outbreak of the epidemic, the United States relied more on quantitative easing policies and money to stimulate the economy, but its domestic industrial development has not kept up.

Is the U.S. economy headed for a recession?

　　The lower-than-expected data has raised concerns that the U.S. economy will fall into recession.

　　Goldman Sachs sees a roughly 35% chance of negative growth in the U.S. economy a year from now.

　　Deutsche Bank believes that the

　　"There are concerns about stagflation in the United States. On the one hand, prices continue to rise. On the other hand, the negative GDP growth in the first quarter is obviously different from the original forecast. The US monetary authority has entered the operation of raising interest rates. If it can predict the first quarter If it is negative growth, I don't think there will be the previous round of interest rate hikes." Jia Kang said.

　　The International Monetary Fund's (IMF) latest World Economic Outlook report lowered its forecast for U.S. economic growth, predicting that the U.S. economy will grow by 3.7% in 2022, lower than the previous forecast of 4%.

　　In early April, the U.S. Treasury yield curve inverted (that is, short-term bond yields were higher than long-term bond yields), a widely used recession indicator that gave the outside world a signal that the U.S. economy was underperforming.

　　But U.S. President Biden said: "I'm not worried about a recession in the U.S. economy. Despite the decline in the data, the reality is that consumer spending, business investment, and residential investment all increased substantially last quarter. And the unemployment rate was 1970. The lowest level in 2018." However, Biden said the risk of a recession "must be always on the lookout".

Cui Rong, chief analyst of overseas macro at CITIC Securities, believes that in terms of follow-up trends, personal consumption, which is still growing steadily, may gradually decline under the

　　influence of high inflation.

Data map: US President Biden.

Photo by China News Agency reporter Chen Mengtong

Is the Fed changing the pace of rate hikes?

　　In the opinion of the interviewed experts, the current Fed is in a dilemma: keep raising interest rates, it may further slow down the economy; if not raise interest rates, it will be difficult to curb inflation.

　　Will the pace of Fed rate hikes change?

　　Jia Kang believes that the next round of interest rate hikes by the Fed is expected to be more cautious, because it is very critical to find a way to prevent stagflation, that is, to digest the current inflation factors, and at the same time the economy can return to positive growth.

　　Bai Ming analyzed that once the interest rate hike cycle starts, generally speaking, it will raise interest rates seven or eight times as a cycle, but the Fed did not expect that the U.S. economy will experience negative growth just once.

Therefore, the rate of interest rate hike in the next round may be smaller, it is not expected to reach 0.5 percentage points, and 0.25 percentage points is more likely.

　　However, Cui Rong believes that the current Fed's goal is to reduce inflation.

An important reason for the current decline in the support rate of the Biden administration is the high inflation in the United States. Therefore, in order to win the Democratic Party's victory in the mid-term elections, the Biden administration will continue to put political pressure on the Fed to fight inflation.

It is expected that the negative GDP growth rate in the first quarter of the United States will hardly change the Fed's tightening pace, and the Fed will continue to significantly tighten monetary policy in the short term.

　　The CICC Research Report maintained that the Fed will raise interest rates by 50 basis points in May and June, and officially announced the judgment of "shrinking the balance sheet" in May.

However, with the tightening of the Fed, the momentum of US economic growth will gradually weaken.

　　How does China respond?

Bai Ming believes that neither people can cut wool, nor can people give water. China should put more emphasis on building a unified large domestic market, opening up market blockages and difficulties, and realizing a positive interaction between industrial upgrading and consumption upgrading.

(Finish)