Weekly Economic Report 4.29.22

The recession that the consensus did not expect to start until 2023 or 2024 is upon us – with real GDP down at a -1.4% annual rate in the first quarter. We have been arguing for months that the fiscal cliff was robbing consumers of nominal buying power, while inflation was exacerbating the effect on real spending. Now, the price spikes in food and energy sparked by the war in Ukraine have slashed spending power and profits even more. The financial markets know, with bonds signaling recession for months and the equity markets catching up late, like before the Great Financial Crisis. If we were the NBER, we would mark the start of the recession to December 2021, after the Fed pivoted on monetary policy, President Manchin cut off child care credits, inflation flared up from an already elevated pace and December retail sales plunged because the holiday season had been pulled forward by fear of supply shortages and inflation.