US entering stagflation

US entering stagflation. By David Goldman.

Net of inventory accumulation, real GDP for the third quarter was slightly negative, US government data released Thursday morning show. Real GDP grew at an annual rate of 2%, below the forecasters’ consensus of 2.6%, the Commerce Department reported. …

The GDP measure of inflation rose at a 5.7% annual rate during the third quarter, following a 6.2% rate of increase during the second quarter.

After inflation, final sales to domestic purchasers rose at an annual rate of just 1%. That’s a textbook portrait of stagflation.

Disposable personal income fell at a 0.7% annual rate, as prices outstripped income growth. By the Labor Department’s measure of prices and average wages, real earnings of US workers have fallen by about 2% over the past year despite nominal pay raises averaging about 4%. …

Altogether, the available data show the United States dead in the water, with inflation eating up all the demand stimulus that the government poured into the post-Covid economy.

Actually its worse than that. The inflation measure used by the bureaucracy to compute real changes from nominal changes deliberately underestimates inflation, probably by about 2 – 3% annually. Therefore the actual real changes are no growth in GDP and a 3% fall in wages.

Where the US goes economically, the rest of the west will follow soon.