The recent news that U.S. Gross Domestic Product (GDP) shrank in the first quarter prompted full-blown recession fears among much of the legacy media and economic establishment. President Trump blamed the numbers on his predecessor, noting he didn't take office until January 20 and his policies haven't even been fully implemented yet. Trump has a point, but an even closer look at the numbers reveals they aren't as bad as they seem. In fact, former White House adviser and Fox Business host Larry Kudlow sees a hidden boom inside the economic data.
"When you look at core GDP, which takes out the fluky trade trade import numbers...so the heart of GDP---private sector consumption plus private sector business investment---you see an actual increase in the first quarter of 3 percent," says Kudlow.
Kudlow is not alone in his theory. KTRH Money Man Pat Shinn with Heritage Asset Advisors also notes the first quarter numbers were dragged down by companies loading up on imports ahead of the new tariffs. Shinn says a much better gauge is "real final sales," another name for core GDP, which rose by 3 percent as Kudlow mentioned.
Beyond core GDP, Kudlow also found other reasons for optimism in the data. "Private business investment is up, while government spending is down," he says. "Business equipment and machinery, which is an incredibly important harbinger of economic activity, rose an incredible 22 percent."
"There's no recession there...no recession."