Final Q1 GDP -1.6%; What's in Store for Q2?

Wednesday, June 29, 2022

This morning’s economic data reveal comes in the form of revised Q1 Gross Domestic Product (GDP) numbers, which is the final read. On the headline, we see this expanding slightly to the negative: -1.6% from -1.5% in the last print. It’s the first negative quarter of GDP growth since Q2 2020’s tumultuous Covid-related shutdown.

Back then, the two months of negative GDP growth (Q1 2020 was -5.1%) constituted a technical recession, but that was it — very short-lived. Depending on how Q2 shakes out (and Q2 GDP numbers don’t start coming out until a month from now), especially in terms of growth in the Energy space, we may see our second technical recession in two years.

The other sub-headline numbers come in as follows: Final Demand +2.0% (prior +2.7%), Consumption +1.8% (+3.1% last time), Gross Domestic Income +1.8% (+2.12% previous). The quarter-over-quarter Core (stripping out volatile food and energy prices) Expenditure came in slightly higher at +5.2% from a downwardly revised +5.0%. This is still a high number, though thankfully well off the +6.1% we saw in June of last year.

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

Over the Atlantic this morning, the latest European Central Bank (ECB) conference is just getting underway at this hour. Addressing central bankers in the Eurozone and beyond will be ECB President Christine Lagarde, Bank of England President Andrew Bailey and U.S. Fed Chair Jerome Powell. If we here in the U.S. are fretting recessionary conditions, the EU — with its close proximity to the Ukraine war, among other things — is almost assuredly heading toward negative growth.

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