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Analysis

GDP Growth Slows But Doesn’t Shrink

However, the details of what was up and down were important and there is at least one disturbing sign.

The advance estimate of GDP for the first quarter was an annual rate of 1.4%. That there would be a drop from the 3.4% rate in the fourth quarter of 2023 was widely expected. The details of what moved and how are important.

But first, recognize that this was a slowing of real gross domestic product growth, not a fall in GDP, and so probably not a sign of a recession. The rough rule-of-thumb of two consecutive quarters of negative growth wouldn’t even start under this result. Although the actual call of a recession by the National Bureau of Economic Research uses a far more complex set of metrics, it has never seen a recession when there was no fall in GDP. Also, advance estimates often change as additional information is available.

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Erik Sherman

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