Economy

What Would Make US GDP Go to Zero?

Douglas A. McIntyre

Published: May 16, 2016 9:40 am

Last Updated: January 13, 2020 8:01 am

The 0.5% improvement in first-quarter gross domestic product (GDP) is not far from zero. It would not take many factors to push growth down to zero or even below. Several things have happened in the past month that should lead to the conclusion that the U.S. economy is not growing.

First among these is actual sales among the nation’s largest retailers. While the government said retail sales rose 1.3% in April, it would be hard to tell shareholders in J.C. Penney Co. Inc. (NYSE: JCP), Macy’s Inc. (NYSE: M), Kohl’s Corp. (NYSE: KSS) and Nordstrom Inc. (NYSE: JWN) that. Each either reported poor earnings or a poor outlook, and some of had stock prices off by double-digit percentages. The American consumer has darted away from shopping at stores.

Fuel prices have risen. At the start of the year, there was much optimism that gasoline prices might head toward $1 a gallon. Since then, as crude prices have increased from $30 to $46, and appear to be moving higher, gas prices have topped $2. In some places in the country they are closer to $3. Discretionary income was supposed to be lifted as gas prices fell. Whether that was true or not, it is no longer an option.

The Brexit effect on the economies of the United Kingdom and the European Union could drive both areas into recession. Since the U.S. economy relies so heavily on growth in those regions, the impact across the Atlantic could be damaging. Leaders of both the World Bank and the International Monetary Fund have said they believe the Brexit will undermine global growth. The referendum on it is less than a month away.

The Chinese economy is either shrinking or has stabilized. Most opinion supports the “shrinking” argument. PMI has been weak for months. The latest sign of trouble is data released by the National Bureau of Statistics that show poor results for both factory and consumer activity.

Some economists believe that jobs added to the U.S. economy since the recession are tilted in the direction of those that pay poorly. If so, the recovery may be weaker than thought. Add to this the poor job numbers for April, and the employment data does not look as good as the simple information on the jobless rate, which has hovered around 5%, may suggest.

The U.S. economy is growing slower, and some sectors are not growing at all but are shrinking. The evidence is mounting that the GDP may not be growing now.