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Can the US Q4 GDP Break the Recession Narrative


Amidst all the debate of whether the US is heading into a recession this year, we get the first look at last year’s GDP figures. This could be the market’s biggest mover, especially if it doesn’t meet expectations. There are a lot of forecasts. The Fed’s GDPNow tool is saying it will be 3.5%, while the consensus among economists is that it will be 2.6%. That compares to the prior quarter’s revised 3.2% result.

But it’s important to remember that just as a country can have a “technical recession”, it can have “technical growth” as well. The unexpected drop in imports was the main driver of third quarter GDP increase. The trade calculation contributed to GDP but Americans were not buying as much.

It’s all inflation’s fault

Given the context of high inflation at the time, it’s logical Americans were buying less. At that time, the dollar had been relatively strong and imports were considered to be deflationary. The dollar has been weaker since then in anticipation that the Fed would stop raising rates. This means that imported goods are more expensive, which could theoretically support a rising GDP.

A second interesting aspect is that the…

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