GDP Growth Misses Estimate by 64 Percent, Recession Fears Real

The Commerce Department reported Thursday that U.S. gross domestic product in the first quarter rose just an anemic 1.6%, while analysts had predicted GDP of 2.4% for the first quarter — a miss of 64% from the estimate.

"The Fed wants to see inflation start coming down in a persistent manner, but the market wants to see economic growth and corporate profits increasing," Zaccarelli said. Wall Street had been crowing about the consistent decline in inflation in the second half of last year and the potential for a "soft landing," whereby the U.S. economy could avoid a recession and mass layoffs.Stagflation is the worst of all possible outcomes, economists say, because it is far harder to address — and may require the Fed to increase interest rates at a time when growth is weakening.

But U.S. national debt exceeds $34 trillion and the annual deficit is mounting — near $2 trillion a year as the U.S. Treasury rolls over maturing debt to bonds currently paying 2% annual interest to 4% annual interest. While warnings of stagflation periodically have popped up each year since 2021, only to be quickly quashed down in the face of a strong labor market and consumer spending, Thursday's economic data upended that belief.

Options on futures for the Secured Overnight Financing Rate show a 21.4% probability of a Fed rate hike by December, up 17% from Wednesday.

Source: Financial Digest (financialdigest.net)

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