First Quarter GDP +1.1% Reflects Military Spending on Ukraine War, and Drop in Domestic Investment Along with Inventories

Posted originally on the conservative tree house on April 27, 2023 | Sundance

The Bureau of Economic Analysis (BEA) released their first quarter estimate of economic growth [DATA HERE] and the result of 1.1% growth shows how the U.S. economy has become dependent on government spending money we don’t have. The Gross Domestic Product (GDP) calculation is a valuation of all goods and services created within the U.S. economy, minus the value of goods and services imported.

Keep in mind that all calculations are in dollar terms. Personal consumption expenditure (PCE) prices increased 4.2% in the first quarter after increasing 3.7% in the fourth quarter. Excluding food and energy, the PCE “core” price index increased 4.9% after increasing 4.4%.   Two-thirds of the increased spending on goods was driven by higher prices, only one third by consumers purchasing more stuff.

Looking at Table 2 (the percentage change by sector) the increase in prices provided 2.48% lift to the GDP but the actual purchasing of goods only delivered 1.45%.  Meanwhile the decline in inventories subtracted 2.26% from the GDP, a major factor, and domestic investment has dropped subtracting 2.34%.

Government expenditures (+0.81) drove more than 70% of the total GDP growth as national defense spending (Ukraine War) was a major federal component.  The local and state government spending increase was driven by higher wage rates.   Don’t forget there’s $2.2 trillion in Inflation Reduction Act (Green New Deal) spending that is also within the economy.

Overall, this is a dark picture.  Inflation is still raging. Inventories are dropping as consumer purchasing is squeezed, and replacements goods are not being manufactured. Companies are tightening their belts.  The federal government is spending to try and assist the economy, but the private sector is contracting economic activity.

When households evaluate their checkbooks, a Biden administration claim of a growing economy falls flat – because the only part of the economy that is growing is the part that fuels the energy and security needs of Europe.  Main Street USA is suffering through the massive inflation that Joe Biden has created, and purchases of anything other than necessities have come to a near halt.

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