USA: Surprising decline in the US economy

There is no longer any talk of a stormy economic recovery in the USA. GDP is shrinking, which was not to be expected. This is mainly due to an immense trade deficit. But inventories are also declining. The strong dollar made importing goods particularly interesting. Thus, the currency development has an impact on the gross domestic product.
 
At second glance, however, the figures turn out to be not all that bad. Private consumption is growing more strongly than in the previous quarter. The annualised increase in private consumption amounts to 2.7 % compared to the previous quarter. Investment is also growing robustly.
 
So far, there are no signs that the US economy will pick up speed in the second quarter. Although GDP growth is likely to be positive, it will remain on the lower end. The supply chain problem remains a burdening factor. In addition, the noticeably higher interest rate level could become a burden for the construction sector. Meanwhile, private consumption should remain a support. Above all, the strong recovery on the US labour market is boosting private consumption.
 
Precisely because private consumption and investments are on the rise, the decline in GDP has no consequences for the US Federal Reserve. The course is fixed. The US monetary polidymakers have declared war on inflation.
 
Already next week, the Fed will ignite the next two rocket stages. According to recent statements by Fed Chairman Jerome Powell, an interest rate hike of 50 basis points is considered relatively certain. The decline in GDP will not change anything about a big rate hike.
 
In addition, the balance sheet reduction will also be launched. In the process, the Fed will collect liquidity to the tune of 90 billion US dollars per month. It would only change course if private consumption were to take a bigger hit.