You’ve seen the headlines already, but let’s look a little deeper:
U.S. economic growth cooled in the first quarter as businesses cut back on investment and restocked shelves at a moderate pace, but stronger demand for automobiles softened the blow.
Gross domestic product expanded at a 2.2 percent annual rate, the Commerce Department said on Friday in its advance estimate, moderating from the fourth quarter’s 3 percent rate.
2.2% is not a disaster. It’s about what you’d expect a hot economy to do as it cooled off. It’s been the same with jobs growth. 120,000, 140,000 — not bad, if we’d just enjoyed a year or two of 200,000+ growth each month. Of course, we never got that hot economy. We never got the jobs growth. We never got the big GDP numbers.
As Zero Hedge reminded everyone this morning, “It now takes $2.52 in new debt to raise GDP by $1.00.” That’s unsustainable. And everyone knows it. It’s just that in Washington, they can pretend not to know it, so long as Bernanke keeps doing the ZIRP and the Twist.
Want to hear the really scary part? You probably don’t, but I’m going to tell you anyway. Last quarter’s anemic growth might have been borrowed from the current quarter, thanks to the unseasonably warm weather. I’d look for sub-2% growth perhaps as early as this quarter, but certainly in the second half of the year. That stinks.