Economic growth
The US economy unexpectedly contracted by 0.4% in the first quarter of 2022, compared to the previous quarter, due in large part to a decline in inventories and exports. Consumer and business spending continued to grow however, suggesting that activity still has some momentum.
US real GDP quarterly change %
Growth in the euro area slowed to 0.2% in the first quarter. The Italian economy contracted, the French economy posted 0% growth and Germany grew by 0.2%. China’s growth slowed in Q1 to 1.3% compared to 1.5% in Q4 2021. But the economy is still growing, despite the severe COVID lockdowns in key cities. Korea also slowed to 0.9% in Q1. Other countries like the UK and Japan are still to report Q1 growth.
And going into Q2, JP Morgan economists’ global manufacturing output PMI tumbled 2.4% points in April to its lowest level since June 2020. Global factory output for April is looking grim. At 48.5, the global manufacturing PMI points to an outright contraction of 0.8%ar in the three months through April. Given the tracking for February and March (0.35%m/m on average), the latest PMI points to a nearly 3% collapse in factory output last month.
Business returns
US corporate quarterly results were poor. Apple warned that supply chain disruption due to COVID-19 meant it was likely to struggle to meet consumer demand this quarter, affecting up to $8bn in revenue. Amazon reported a 3% fall in online sales in the first quarter of the year, pointing to an easing of the pandemic-driven boom on online retail. And Meta, formerly known as Facebook, reported its slowest revenue growth in a decade, reportedly as businesses cut discretionary advertising spending.
Amazon stock price $
Inflation
Alongside the growth slowdown, inflation continued to accelerate in the G7 economies. US inflation hit 8.5% and counting. US employment costs rose by 4.5% in the year to the first quarter, the fastest rate in 21 years. Euro area inflation accelerated to 7.5% in the 12 months to April, beating March’s record high of 7.4%. Netherlands inflation rose to 9.7% yoy. Both Brazil and Russia experienced double-digit rates. And even Korea and Australia reached 5%.
US CPI inflation yoy %
Interest rates
Both the Fed and the Bank of England are set to hike rates by at least 0.5% pts this week with likely further hikes during the rest of the year. The Reserve Bank of Australia hiked its policy rate for first time in eleven years. These hikes and the prospects of more are driving up lending costs as indicated by the US Treasury bond yields reaching 3% for the first time in three years; while mortgage rates rose, threatening to reverse the US house price bubble (US home prices are up 34% since the beginning of the pandemic). The Bloomberg global aggregate bond index has fallen by over 11% this year.
US ten-year government bond yield (%)
Currencies
With the US Fed planning as series of hikes and with worries about the global economy and war, the US dollar hit a twenty-year high against a basket of advanced economy currencies. The Chinese renminbi recorded its largest one month fall on record following growing concerns over future growth in the country and expectations of rising US interest rates. A strong dollar and rising interest rates are increasing the risk of default by a range of poor countries in the Global South.
US dollar index against other currencies
Financial assets
In the US, the real return on equities averaged 9.2% a year between December 1981 and December 2021, far outstripping growth in average real earnings of 0.5% a year and overall GDP growth of 2.7%.
But now things are changing fast. Global equity markets have fallen over 11% since January. Chinese equities and European stocks have seen larger declines with China suffering from renewed lockdowns and Europe vulnerable to the fallout from the war in Ukraine and disruption to the supply of Russian energy. The American equity market has a heavy exposure to technology. Shares in Facebook and Netflix have fallen 44% and 65% respectively this year after announcing declining user or subscriber numbers. Shares in Apple, Google and Amazon have also declined. Apple warned that supply chain problems and factory closures in China could cost the business $8bn in the current quarter.
US S&P 500 stock index
In sum: slowing growth, rising inflation and interest rates, falling financial returns; rising risk of defaults on loans; and war.
See my report Forecast for 2022. https://thenextrecession.wordpress.com/2022/01/01/forecast-for-2022/
Michael Roberts Blog 
“The US economy shrank in the first three months of the year, contracting by -0.4% in the first quarter, or -1.4% on an annualized basis”
Could you please explain why the media only mentions the annualized number? Thank you!
Yes, the US stats office use this annualised figure which is worth than useless. I think it is because it looks good when things are goig up.
Thank you for the explanation. So maybe they need to amplify psychological effects, both positive and negative, which are necessary for financial markets.
Michael, Do you think a double dip recession like in the early 1980s is likely?
Dear Luis Certainly a deep recession is necessary -but that’s something that the monetary and fiscal authorities have aimed to avoid through the 2010s – contributing to the slow growth and weak investment in productive assets over the last ten years.
If Jerome Powell pivots and floods the market with token US Dollars, the demand for Gold (the sole money commodity under Capitalism today) will soar and the US Dollar will continue its depreciation that started in 1971. This would further threaten the already weakening dollar system that the American empire relies on for its continued existence and possibly cause its end. For this reason, Powell would have to allow the impending panic and deep depression to take place. Once this depression and global financial crisis takes place (assuming Powell does not pivot before it takes place, causing the end of the American empire), it would lead to a massive destruction of capital and wealth and the bankruptcies of banks and corporations throughout the world. And that could end the American empire as well. Either way, the American empire has reached the end of the road. Hopefully this time, Capitalism will finally die like it should have in 2008.
I don’t think that the U.S. empire has reached the end of road yet, but it will become something like Byzantine Empire which last more about 1000 years. The U.S. hegemony will be limited to the new world, but what will happen to the old continent? Dark Ages (Middle Ages in Western Europe) or “Da Tang Sheng Shi” (Golden Age of Tang Dynasty)?
The seriously wealthy, the owners of a meaningful part of the country, the ruling class has I think decisively turned against the old model where some benefits are doled out to parts of the masses. Not one bit of social democracy (aka welfare state) can be allowed!. See, the career of Macron. Worse, government bonds are the liquidity in the fictitious capital. For this reason, today’s governments must be austerian whenever and wherever the ruling class can impose its will. This has nothing to do with inflation: It’s just old fashioned class-warfare. In the course of events, this will prove to be decisively wrong. If it doesn’t lead to a catastrophe, it will grind down society for an unforeseeable period of time. The owners have long experience to tell them though that they personally can still prosper even as the nation despairs.
The thing is, class struggle is always carried out in the arena of the state, which means political struggle. Doesn’t it seem probable that the Fed in the US is more willing to risk tanking the entire economy precisely because they are playing politics? Biden is already blamed for inflation, however fatuous a charge this is. The rulers’ media have universally sold this. The Republican Party is bidding for minority rule on behalf of the bourgeoisie. The bourgeois, great or small, is turning to fascism and their Fed will fight for their party. A recession is good class war tactics for them and good politics for those tired even of bourgeois democracy. The half-brother fascism is to get his chance at managing the business?
The welfare state was just a very short period in the History of capitalism, and it just reached a very limited portion of the capitalist world (the USA + those regions bordering the USSR).
It still baffles me many people still talk about the post-war miracle years as the rule, not the exception, of capitalism, as if the end of the welfare state was some kind of moral degeneration of the capitalist class or secular dilapidation of the capitalist system.
You think the Fed is not willing to risk more to undercut Biden to favor the Republican Party attack on previous bourgeois norms? Or it is that you do not think the bourgeoisie in general is turning to fascist means? Or even that the Republican Party in the US is not part of a fascist project? I do not think you have considered the war on Russia as fascist, not even in Ukraine, as you are usually quite outspoken.
The highly educated strata in the socialist countries always compared their lot to the their counterparts in the richest capitalist countries, though apparently they liked to think of the US and northwestern Europe merely as “democracies.” They never compared their society to places like Mexico, the Philippines, Yemen, Pakistan, Morocco, Burkina Faso or Haiti. I fail how to see the phenomenon you describe is different in other way than being geographical. In both cases, the winners are merely dubbed the norm.
Nonetheless, it still seems to me that it matters if the welfare state is eliminated, however limited in time and space it was. The judgment that the secular trend of rot in the world system means the bourgeoisie can’t really deliver on their promises even in the favored seats of imperialist power still means I think the bourgeoisie is turning away from bourgeois democracy, favoring fascist modes of state power. After WWII, in the Trentes Glorieuses, the US played at decolonization world-wide. They even played with land reform and breaking up monopolies and permitting official CPs in nations they defeated. By the twenty first century, imperialist chieftains were creating confessional machines and revanchist religious instead.
Stephenjohnson,
“The bourgeois, great or small, is turning to fascism and their Fed will fight for their party.”
It’s not only the bourgeoisie that is turning to fascism, it’s also the working class. Wasn’t it the support of working class voters in north east America that pushed Trump over the line and working class voters in north east England that pushed Johnson over the line?
Trump lost the vote in both 2016 and 2020, So, no, Trump was never “pushed…over the line” in the first place, making your question deceitful. The libel that the “working class” is Trumpist is your wishful thinking, not a fact. Also, most people confuse all discussion by saying “class” when they should say “socioeconomic status.” But class should be defined by property relations. Another favorite trick to confuse analysis is to conveniently assume away the existence of non-voters. Whether people don’t vote because they are barred by various legal methods or because they are only allowed to choose between Ins and Outs who are merely rivals with nearly indistinguishable policies or because bitter experience has taught them that elections don’t matter is irrelevant. The stand presumption they are satisfied is purely ideological, as in, no one even attempts to provide evidence.
That’s simply not true; those make 100,000 a year or more were more likely to vote for Trump; those making the median household income, or less, for 2016, around 54,000, were much less likely to vote for Trump.
SJ,
“Trump lost the vote in both 2016 and 2020, So, no, Trump was never “pushed…over the line” in the first place, making your question deceitful.”
So Trump did not become president of the USA in 2016?
AC,
The Rust Belt states of Pennsylvania, Wisconsin and Michigan went from strong Democratic states to marginally Republican states.
Workers who suffered under globalization turned against the Democrats.
Come on Henry, quit playing the fool. Trump lost the popular vote in both 2016 and 2020. He won the electoral vote, and institution created to reassure the slaveholders and agrarian “democrats.”.
Henry Rech “So Trump did not become president of the USA in 2016?” Yes, the candidate who lost the vote won the Electoral College. Citing the Electoral College vote as evidence of popularity while ignoring the actual vote is I think typically duplicitous.
SJ,
I did not say he won the vote.
Yes, he lost the vote but he won the election.
There is no duplicity on my part, but there is the US electoral gerrymander.
In 2016, Trump won 304 electoral college votes and Clinton 227.
The three states in question carry 46 electoral college votes.
Had Trump not won these three states, Clinton would have secured 273 electoral college votes and Trump 258 electoral college votes.
To win the election, a minimum of 270 electoral college votes was required.
These states were the most marginal (less than 1% winning margin) of those supporting Trump.
It is fair to say, these Rust Belt states pushed Trump over the line with huge swings against the 2012 result in these states.
The point I made above is neither deceitful nor foolish. It is based on fact.
I did not say the US working class on mass supported Trump but there were enough in these three states who changed their vote and this pushed him over the line.
Go back and see what I said exactly.
AC and SJ,
Just so you are clear, I think the US electoral college system is an abomination of democracy.
It seems I have to explain everything in detail so that you don’t run off making mountain ranges out of ant trails.
Henry,
There has been a pretty relentless attack/downsizing of the industrial working class in the three states you mention. If you look at the county by county vote totals for 2016 in Wisconsin for example, those with a median income above the national average went for Trump; those below the national average went for Clinton. “Workers who suffered under globalization turned against the Democrats”? No doubt some did, but… let’s be clear, Wis. Mich. Penn were strongly Democratic in the past because of the size and strength of the unionized working class. That has changed dramatically since 1973, leading to a restoration of power to the rural areas of those states, where the resentment of the petty bourgeoisie has festered for years. Michigan for example has a long history of KKK activities, and was home to militias well before the 2009 upsurge after Obama was elected.
In any case, you really are ignorant of the real history of the US, as evidenced by your paltry knowledge of the real breakdown of the 2016 vote. You spend most of your time wasting ours with your mouthing of elegies to US capitalism. Close, but not close enough to an eulogy.
SJ and AC, you obviously don’t bother reading what I say. You are content to create a strawman and conflagrate.
I said something very specific and you turn it into something grander mainly because you are starved of the opportunity to kick heads here because no-one is game enough to put an alternate view in this blog.
SJ, perhaps you might try looking into a mirror occasionally, you might get a glimpse of the truth.
SJ even raised Biden and 2020. Who the heck was talking about Biden? And who was talking about Trump and 2020? SJ merely ran out of ideas.
And yes, the US gerrymander is despicable and unconscionable.
“No doubt some did, but… let’s be clear, Wis. Mich. Penn were strongly Democratic in the past because of the size and strength of the unionized working class. That has changed dramatically since 1973, leading to a restoration of power to the rural areas of those states, where the resentment of the petty bourgeoisie has festered for years”
That precisely supports my point. Thank you AC.
“You spend most of your time wasting ours with your mouthing of elegies to US capitalism. Close, but not close enough to an eulogy.”
Sure, except that you are wasting your own time here repeating the same distortions of fact over and over and filter everything through your own prejudices and predilections. There is no free thought. It’s not so much that I like what I see in the US but more that I find more abhorrent what I see elsewhere.
And it’s a shame Michael allows defamation and disrespect even though he says otherwise. What sort of show are you running here, Michael? You ask people to desist from playing games with names yet allow it to persist unremarked.
Henry I did not notice this. Will check.
I ask everybody to desist attacking each other in personal terms. Perhaps everybody should comment on the posts and not on each other – or start their own blog.
AC,
I am not justifying Trump’s accession to the presidency.
It is fact that the three states in question registered huge swings in the opposite direction.
It gave Trump the required electoral college vote and the presidency.
Henry Rech wrote “It’s not only the bourgeoisie that is turning to fascism, it’s also the working class.” The fact that Trump didn’t win the popular vote is directly relevant to this claim…but it is ignored. I think this is deceitful.
Almost all the polls projected a larger margin of victory for Biden than manifested on election day. It seems to me to be a fair question whether vote suppression wasn’t more successful than the bourgeoisie’s media wanted to admit.
The insistence that Trump “won” in 2016 and picked up even more votes in 2020 ignores the differences in turnout, as well. It also smells of the preposterous nonsense that mail-in ballots etc. are somehow illegitimate because…well, because it prompts more working class voting. This directly argues against Rech’s purported claim “the working class” is also turning to fascism.
A mirror is not an analytical tool.
for your reading pleasure, Henry : https://www.brookings.edu/blog/fixgov/2016/11/16/economic-marginalization-reality-check/
AC
I don’t dispute your assertion.
However, you must read what I said precisely.
I did not say working class voters in America had turned towards Trump en masse.
I said that working class voters in north east America pushed Trump over the line.
Without naming them initially, I was talking about voters in the Rust Belt states of Wisconsin, Michigan and Pennsylvania.
In 2012, Obama had won these states by 7-10% margins approximately (working off memory).
In 2016, Trump won these by margins of less than 1%.
That is, there were 8-11% margin swings in these states – big swings.
These states were the most marginal wins by Trump.
In other words, had he not won these three states, he would not have achieved sufficient electoral college votes and he would not have ascended to the presidency.
So it is fair to say these three states pushed him over the line.
“Henry Rech wrote ‘It’s not only the bourgeoisie that is turning to fascism, it’s also the working class.'” This by the way was in context where I talked about the bourgeoisie turning to fascist methods…and I did mean in general, or as Rech amps it up (to raise the bar, move the goalposts, what have you.) “en masse.”
Yes, it is much more convenient to change this into “the working class in three states put Trump over the line in the Electoral College.” It’s also still convenient to pretend the EC score is a meaningful measure of popularity, as in, actual majority rule.
The bourgeoisie is not at all committed to the proposition that democracy involves majority rule, except when they imagine/pretend they have a majority, as in the EC red herring. Indeed, they and their dutiful stooges tend rather to favor the idea that somehow true democracy means the minority must have a veto! It is not true that the working class is turning to the idea that some people are better than others and stakeholders should rule despite the majority and such ideological reaction. This is doubtful even if you misuse SES as a synonym for class, I think.
SJ,
“It’s also still convenient to pretend the EC score is a meaningful measure of popularity, as in, actual majority rule. ”
Who pretends this?
Please read what I have said on this matter.
You completely misrepresent what I say because you have no legs to stand on.
Oh Henry, you doth protest too much. What you said was: “Wasn’t it the support of working class voters in north east America that pushed Trump over the line” and “It is fair to say, these Rust Belt states pushed Trump over the line with huge swings against the 2012 result in these states.” Conflating the two when in fact analysis of your first claim proves its not true, and the huge swings were not of the working class and the poor, but of the rural areas and “petty bourgeoisie” which went for Obama (and then some went for Sanders) after the 2008 debacle, but once the imminent danger had passed went on to protecting their property. Trump’s victory was based in rural areas, and not among working class and poor, but among those whose household median income exceeded the national average–
As for the rest, you told that US wasn’t quite as imperialist as the European countries, intervening less in matters of subordinate countries, when a simple reading of US actions in Central, South America and the Caribbean shows that your claim is 180 degrees out of synch with reality; you’ve told us that the US can reindustrialize at will, without any analysis of what exactly the US has done to debilitate the working class over the last 49 years, and repeated other nonsense without any critical sense.
The key characteristic of the last 49 or so years has been not deindustrialization so much, as reduction in the labor force which means the surplus value extracted is declining relatively to the value of the means of production. This is a long term trend and if you think it can easily be reversed then show us how. Show us, for example, how US railroads which have reduced employment by 75 percent since the end of WW2 can reverse that, and can put more trains on the road quickly, “at will” and how the system will handle it. The fact of the matter is, with car loadings below the 2021 mark, below the 2019 mark, not to mention below the 2007 mark, US railroads are suffering from reduced train speeds, extended delivery times, longer terminal dwells, and greater congestion. So pick something concrete and show us how it’s done. Otherwise you’re wasting our time. If you find such a challenge insulting or demeaning, tough. First rule of Marxist discussion– no whining.
In the course of trying to defend the claim the working class is turning to fascism Henry Rech wrote “In other words, had he not won these three states, he would not have achieved sufficient electoral college votes and he would not have ascended to the presidency.” Winning the Electoral College is irrelevant to assessing the actual popularity of Trump, a good marker for supporting fascism. The answer to the question “Who pretends this?” is indeed Henry Rech.
Not only did Trump win the presidency because working class voters in the north east of America shifted their support, Boris Johnson also enjoyed similar support.
In fact, the working class in Europe have increasingly supported right wing governments.
This is a world wide phenomenon.
Except if you check the background of those participating in the Jan 6 DC riot, as the New York Times did, you find these are the classic petty bourgeoisie, shopowners, landlords, etc with cops and ex-cops, and not workers.
AC,
” If you find such a challenge insulting or demeaning….”
No I don’t find it insulting or demeaning – I just have other fish to fry.
“…tough. First rule of Marxist discussion– no whining.”
You’re hard man AC. (You’ll have to show me your scars some other time.)
Then I recommend you not make assertions that you won’t or can’t backup
Recommendation not accepted.