GDP Q1 2023 and The Direction of the Economy

Why the Q1 GDP number isn't a good sign.

The US 2023 Q1 GDP number came out today at 1.1% which was .9% lower than the 2.0% forecasted. The previous 6 GDP numbers are as follows:

  • Q1 2023 1.1%

  • Q4 2022 2.6%

  • Q3 2022 3.2%

  • Q2 2022 -0.6%

  • Q1 2022 -1.6%

  • Q4 2021 7%

  • Q3 2021 2.7%

What is GDP and what does it mean?

GDP (gross domestic product) measures the annualized change in the inflation adjusted value of all goods and services produced by the economy. The GDP number is released every quarter and is a very broad way of measuring the health of an economy. A positive GDP means growth of goods and services produced in the economy. A negative GDP means the opposite. Two negative quarters of GDP is what most experts (except the current administration) deem a recession.

As you can see from the GDP list above, we entered into a recession in early 2022, bounced out of it (in time for the midterms) and are headed back in that direction (according to this quarters GDP number). This isn’t anything surprising, the Fed has been hiking rates for 8+ months now in order to bring down inflation. Inflation is up 5% (last month) and the Fed still has a long way to go until it’s in a comfortable spot (2%).

GDP and the economy moving forward.

As the Fed keeps hiking rates, expect the GDP number to keep failing until we are in a recession. As I mentioned in a previous newsletter, the job market is what’s keeping it from feeling like hard times. You can read about it here (The Current Health of the US Labor Market (beehiiv.com)). As long as the job market is holding up, things (such as the economy, 401ks, etc.) shouldn’t get too bad. However, I do expect us to eventually see a recession in late 2023 to early 2024. The severity of it is going to be determined by the actions of the government.

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