A growth shocker!
The U.S. economy unexpectedly declined 1.4% in the first quarter, according to fresh data on Thursday from the Bureau of Economic Analysis (BEA), compared to expectations of a 1.0% increase. Growth was pressured by inventory investment, exports, federal government spending, and state and local government spending. Consumer spending increased.
"Don't freak out about the GDP report, the underlying inertial components were strong," former Obama era economic advisor Jason Furman said in a tweet.
Stocks held steady in the green following the report, but many in the business community will surely freak out over the lackluster read on growth. After all, one more negative quarter for a growth and technically we would be in a recession.
Here's what several pros told Yahoo Finance Live on the state of the U.S. economy in the wake of the disappointing start to the year for growth:
Paul Reilly, Raymond James CEO
"If you look at most of the negative GDP, it was driven by two things. One inventories. If anyone is looking to buy a dishwasher for their house it could take a year to get it through the supply chain. That hurts sales. And imports are up and exports are down. Those were the two biggest chunks. If those were more normalized, we would have had positive GDP. I do think interest rates are important to go up to really fight inflation. The problem is we should have started sooner and we'll have to do it quicker, which is going to create some disruption."
Gargi Chaudhuri, Blackrock iShares Investment Strategy Head
"I think over the last couple of weeks we were expecting the GDP to be a little weaker, but obviously the negative print may have caught some by surprise. I think we should focus on, however, is there does the negative come from? Some of it is related to that negative number. Some of that is related to the growth outside the U.S. I really don't think we should take too much away from this quarter GDP number. I think we should focus on the strength and consumption demand that we are seeing. I would also say that when we forecast second and third quarter GDP, I think we are going to see some of the draws from government spending and from net exports that we saw in the first quarter probably point to a more resilient U.S. economy."
Ynon Kreiz, Mattel CEO
"This was the highest first quarter we have had on record on both the top and bottom lines. Our momentum continued across the business with double-digit growth in Barbie, Hot Wheels and Fisher-Price. We started the second quarter with strong consumer demand, and the full-year outlook is also strong. We expect to grow market share. So overall, an excellent start to the year and we are firmly in growth mode."
Brian Sozzi, a former Wall Street analyst, is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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