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US Economy Grinds To A Halt, Again: Q1 GDP Tumbles Below Expectations, Rises Paltry 0.2%

When looking at yesterday’s flop of a GDP number you have to remember that these cooked government figures are reached using the new formula that was concocted to make things seems better than they actually are.

For a refresher, see:

Q2 GDP Smoke & Mirrors Show & This Is Not a Recovery

The Government “Revises” 84 Years Of Economic History This Week

And so the Atlanta Fed, whose “shocking” Q1 GDP prediction Zero Hedge first laid out nearly 2 months ago, with its Q1 GDP 0.1% forecast was spot on. Moments ago the BEA reported that Q1 GDP was far worse than almost everyone had expected, and tumbled from a 2.2% annualized growth rate at the end of 2014 to just 0.2%, in a rerun of last year when it too “snowed” in the winter.  This was well below the Wall Street consensus of a print above 1.0%.

20150429_gdp

In other words, in the quarter in which the S&P rose to unseen highs, the economy ground to a near halt.

Only this time it wasn’t the snow, as the main reason for the plunge in economic growth was not only personal consumption which was cut by more than 50% from last quarter, tumbling to just 1.31%, but fixed investment, i.e., CapEx, which subtracting 0.40% from the bottom line GDP number, was the lowest print since 2009!20150429_gdp2

The fact that trade also subtracted a whopping 1.25% from the final number shows that while one can blame the weather for anything, the reality is that in the start of the year global trade did indeed grind to a halt, a picture which is only getting worse with every passing day.

The only good news: the massive inventory build, the largest since 2010, boosted GDP by nearly 3.0%. Without this epic stockpiling of non-farm inventory which will have to be liquidated at some point (and at a very low price) Q1 GDP would have been -2.5%.

• source: zerohedge.com

Biggest Inventory Build In History Prevents Total Collapse Of The US Economy

While we already observed that in Q1, US GDP rose by an appalling 0.2%, far, far below the consensus Wall Street estimate (in case you missed it, here again is the one thing every Wall Street economist desperately needs) and precisely in line with the Atlanta Fed forecast which we brought attention to in early March, confirming yet again that US stocks no longer reflect any fundamentals but merely Fed and global liquidity injections, there is something far more disturbing under the surface of today’s GDP report.

Inventories.

Specifically, the $121.9 billion increase in private, mostly nonfarm, inventories in the first quarter.

Cutting to the punchline, this was the biggest inventory build in history.

Change In Inventories

Another punchline: in Q1 2015, the US economy rose by a paltry $6.3 billion in nominal terms to $17.710 trillion.

Here is how the total GDP growth compares to just the increase in inventories, which as we wrote earlier this week, is the primary reason why the world is now gripped in a global deflationary wave.

Q1 GDP in Context

In other words, if US inventories, already at record high levels, and with the inventory to sales rising to great financial crisis levels, had not grown by $121.9 billion and merely remained flat, US Q1 GDP would not be 0.2%, but would be -2.6%.

Oh heck, just round it down to -3.0%

Which means that as this massive inventory overhang is eventually cleared out (once the US runs out of space to store all these widgets, gadgets and raw materials, here’s looking at you Cushing) US GDP will be pressured even more with every passing quarter, or else the moment of deflationary rapture when everyone is forced to liquidate and/or dump this inventory at the same time, will result in a monetary supernova which will leave the Fed with no choice but to literally paradrop money on the continental US.

• source: zerohedge.com

Will the Fed Run Out of Excuses as the Weather Warms?

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5 comments on “US Economy Grinds To A Halt, Again: Q1 GDP Tumbles Below Expectations, Rises Paltry 0.2%

  1. You have to know this better than I do, ‘we the common people’ seem to be doomed.

    I am just about to the point where I have no energy left to read or write. I reblog more often than I write. Maybe it’s my old age, I don’t know.

    I have such limited knowledge and thus, understanding of these economic issues, as I believe is the case with most of us. They didn’t want us to be too informed on these issues, or we might have smelled the rat lurking, so most of us were never instructed, nor did most of us, like me, take the time to learn, We trusted, and this was a gigantic mistake!

    With everything happening beyond this economic catastrophe, I feel more isolated every day. And I would imagine you are experiencing something very similar?

    Thanks again, for trying to awaken people. I am reblogging this.

  2. Reblogged this on An Outsider's Sojourn II and commented:
    We may not have to worry about what is happening in Baltimore, or when the war with Russia is going to begin, since appears the economy is about to collapse. And this will change everything, and for good!

    • Thanks for passing it along and I appreciate your thoughts and comments. If you’re really paying attention to everything that’s going on, you can connect all the dots and see what is really happening. That’s not what you’re getting on the mainstream news- which is why most are clueless. Nothing happens by accident.

      • Exactly. I keep posting about the msm, in fact, I posted something just the other day.

        Nothing is by accident! Absolutely!

        Thanks!

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