(Replying to PARENT post)

“The report is more an illustration of how GDP calculations tend to be volatile from quarter to quarter, not necessarily indicating weakness in the economy or a sign of recession. The contraction was due to a jump in imports and a drop in exports, coupled with a slower buildup of businesses’ stockpiles. On a year-over-year basis, the economy grew 3.6%.

Together, trade and inventories subtracted about 4 percentage points from headline growth. Government spending shrank, also weighing on GDP. But real final sales to domestic purchasers, a measure of underlying demand that strips out the trade and inventories components, accelerated to a 2.6% annualized rate.“ [1]

In case you’re wondering why the market is blowing this off while the Wall Street Journal and, I presume, CNBC, are blowing it up.

[1] https://www.bloomberg.com/news/articles/2022-04-28/u-s-econo...

👤JumpCrisscross🕑3y🔼0🗨️0

(Replying to PARENT post)

I don't think the bloomberg explanation is right, because the net effect of imports on GDP is zero.

Assume you import $1 of goods, which are consumed. Then the GDP reflects $1 consumption (either private or government) minus $1 imports, for a net zero.

The goods may not be consumed immediately, in which case GDP counts $1 inventories minus $1 imports, still net zero.

The thing to remember is that GDP is domestic product, so anything produced abroad is irrelevant.

👤MatteoFrigo🕑3y🔼0🗨️0