
Each month, we provide a brief look at various parts of the market or economy. As I prepared for this month’s newsletter, I spent time reviewing our past reports and noticed something important: we seem like contrarians. While I am not going to break the trend, I would like to stress that we are not contrarians but rather prefer to focus our communications on subjects you may not be reading elsewhere. Case in point:
This week, the government released the preliminary estimates for GDP growth last quarter (4Q2024). As the Wall Street Journal noted, “grew 2.5% last year…slower than 3.2% in 2023 but still a sturdy pace.” This is consistent with the story written elsewhere and as repeated by Federal Reserve Chairman Jay Powell. While I would agree with the math, I think the headline glosses over other interesting facts.
GDP growth has exceeded pre-COVID levels for much of the post-COVID era. However, that growth has been one-dimensional. GDP consists of consumer spending, business investment in property, plant, equipment, and intellectual property, residential investment, federal, state, and local government spending, net exports (total exports minus total imports). Pre-COVID, consumer spending accounted for two-thirds of the economy and two-thirds of economic growth. Since COVID, consumer spending accounted for 85% of growth, meaning everything else is stagnating. The chart on the right shows the results over the past five years relative to the pre-COVID average.
The term “sturdy”, as used by the WSJ, does not seem to apply. Imbalanced is more
appropriate and imbalanced economies do not tend to end well.
To learn more, contact your Comperio representative and request a copy of our full economic chartbook which offers insights into GDP, inflation, jobs, credit creation, and more.
