https://www.wsj.com/articles/u-s-economy-grows-at-2-3-rate-in-first-quarter-1524832800
I found this article rather interesting today. As most know, the GDP recently beat estimates, although still slowed month over month. While a good gdp is never bad, slowing rate of change is a bigger concern. Looking into this article however has me a little more concerned about something else, which plays into a lot of my other general thoughts on the economy right now.
Consumer Spending Dropping and Inventories Rising?
Consumer spending dropped off a cliff. That's a problem since consumer spending largely drives the economy. Given, consumer spending on services is still strong, but consumer spending on goods is not ideal. The interesting thing here is that the GDP didn't drop because inventories rose significantly, signaling that a lot of the GDP was driven by increased business spending activity, partially a result of the tax cuts.
The issue here, is that inventories are at least somewhat dependent on consumer spending. If consumer spending continues to stay low, then businesses will stop adding to their inventories for obvious reasons, and that component which is keeping GDP high will drop out. I assume that the inventory spending was largely in anticipation of a boom in consumer spending after tax cuts were put into place.
Either way, there is clearly a lot more complexity here, so take this at least somewhat with a grain of salt, but I found this worth sharing for anyone here who doesn't necessarily have the rosiest forward picture of the economy right now.
Edit for Clarification: The consumer data I reference is a little more than half way down in the chart. You'll notice a big drop off in consumer goods spending (not services) compared to last year's averages.
Submitted April 30, 2018 at 11:46AM by cbus20122 https://ift.tt/2w5mQ2m
