We now know that the economy has started to put on the brakes.
GDP growth slowed in the 1st quarter to 1.1%, the Bureau of Economic Analysis reported yesterday – significantly less than the consensus Wall Street expectation of 1.9%.
At the same time, one of the Fed’s preferred measures of inflation (if not its favorite), the Personal Consumption Expenditures index, headed in the wrong direction to 4.2%, higher than the expected 3.7%.
Some say that suggests the economy has continued to expand amid high inflation and tighter financial conditions, that growth rate isn't sustainable,
Pantheon Macroeconomics’ chief economist Ian Shepherdson believes the economy will slow further as households cash in their savings and more investments while dealing with more challenging financial conditions.
Shepherdson warns that the economy will enter a sharp slowdown over the current quarter, causing GDP to shrink by 2%.
"It would be dangerous,” he said, “to extrapolate that apparent strength in the 1st quarter into an expectation of a decent spring and summer."
Chris Zaccarelli, chief investment officer of Independent Advisor Alliance added, “[Yesterday’s] data was the worst of both worlds, with growth down and inflation up.”
For over a year now, some of the financial world’s so-called best and brightest – billionaire investors, hedge fund managers, and economists – have cautioned that rising rates will eventually trigger a recession.