CC-Transcript

• 00:00We do have some bad news in the overall numbers, certainly with GDP contracting. I think it makes the Fed’s job a little easier because this report is so distorted by tariffs that there’s no point in doing anything. GDP contracting by 3/10. But because of the distortions. What you want to look at is real final sales to see where the country really is. Consumers really are and businesses really are. And they were up 2.3%. Not a lot of help from the consumer side, up only 1.8% after a 4% gain in the fourth quarter. Consumers definitely pulling back. But look at business investment, up 9.8%. And if you go drill into that, 22 and a half percent was equipment purchases. And probably most of that came from imports as people tried to reef to run ahead of the tariffs being put on inventories. We were wondering about that because of all these imports, they hadn’t shown up. They have shown up now $140 billion in the fourth quarter. They were 8.9 billion. So inventories alone added two and a quarter percentage points to the overall GDP, whereas the number that we got from exports subtracted one and a quarter. So even with all that, we get a contraction. Federal government spending, I want to point out, did fall during the month. So it wasn’t the government’s contribution. And along those lines we got the employment cost index. Wages and salaries for civilian workers up 8/10, but wages and salaries for government workers down by 2/10. That, I’m sure, reflects the Dodge cuts that are out there. Yeah, I want to pull up. We can go on the terminal. This is Nat’s favorite function. I think he showed me it this morning. My eyes popped out of my head. That orange bar there is that net exports bar. It’s what you were talking about there. It’s with the imports really taking a hit out of the number. But how much of that, Mike, is people importing to get ahead of potential tariff price pressure issues in the future. How messy is that line? Well, the line’s a little bit messy because it also includes gold and a lot of investors brought gold into the country in the first quarter because they were afraid that the president would tariff it. But it’s not used for anything and it’s not consumed, so it doesn’t count in GDP. So that had to be subtracted out first from those net exports to give you the headline GDP number. But it’s still in that increase in export, the decrease in exports that you’re talking about. And then in terms of the overall decrease in net exports, it’s a lot of imports. It’s that equipment, business equipment coming in, it’s toys and games coming in. It’s a lot of stuff that people tried to get ahead of the tariffs. Now this is stuff that has made it to port. The big question is what’s out there for the second quarter? There’s a feeling among some economists that we’re going to see a rebound because people will bring stuff in. But in this case, all we’re hearing about is shipping being canceled.