Dow Drops 400 Points on Weak GDP Report, Inflation Concerns

9:40 AM · April 25, 2024

Excerpt CNBC, Heather Long cnbc.com

Bottom line: The US economy is slowing, but it's still very solid. This isn't a recession. It's just more normal growth after a surge in the 2nd half of 2023.

-Consumers are back to spending big on services and being choosy on goods
-Federal gov't spending is moderating after… pic.twitter.com/uQnUTg1Qmz
— Heather Long (@byHeatherLong) April 25, 2024

Futures tied to the Dow Jones Industrial Average fell 419 points or 1.1%. S&P 500 futures slid 1.1%, and Nasdaq 100 futures dropped 1.5%.

U.S. gross domestic product expanded by 1.6% in the first quarter, the Bureau of Economic Analysis said. Economists polled by Dow Jones forecast GDP growth would come in at 2.4%.

Along with the downbeat growth rate for the quarter, the report showed consumer prices increased at a 3.4% pace, well above the previous quarter’s 1.8% advance. This raised concern over persistent inflation and put into question whether the Federal Reserve will be able to cut rates anytime soon.

Continue Reading at CNBC, Heather Long

Author Commentary

Ed Morrissey Apr 25, 2024 9:40 AM ET

Heather takes the optimistic approach, which is tempered by the reaction on Wall Street. The truth is probably somewhere in between. The drop in federal spending probably is related to the end of the lengthy stimulus packages that drove inflation the past three years, but the inflation is still with us while the federal spending increases are not. This is just one quarter's data, but if inflation keeps outstripping growth, we're looking at stagflation risk again, or an outright recession as consumers stop spending their money and start hoarding it instead.

The big question is what the Fed will do next. They've been itching to cut rates, and that would help keep consumer spending and business investment in positive territory -- but risks setting an inflationary fire again, too. I'd bet on a rate cut at the next meeting anyway.