Wall Street Breakfast Why Q1 GDP was actually really good
May 8, 2025
James Kostohryz, a strategist from Successful Portfolio Strategy known for his insights on economics, examines the surprisingly positive aspects of the Q1 GDP data despite its contraction. He discusses how a rise in imports may actually indicate a robust economy. The conversation also touches on the impact of tariffs on equipment investment and the mixed signals of consumer pessimism versus rising investment. These insights provide a nuanced perspective on current economic forecasts and potential future growth.
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Imports Drove Negative GDP Number
- The Q1 GDP contraction was driven by a spike in imports, which actually indicates stronger demand.
- In GDP accounting, increased imports are subtracted, causing a negative GDP number despite positive spending.
Private Economy Grew 3%
- Excluding net exports and government spending, the private economy actually grew about 3% annualized in Q1.
- This shows the underlying economic activity was strong despite the headline contraction.
Investment Front-Run Tariffs Boosted Q1
- A surge in equipment investment in Q1 was driven by businesses front-running tariffs, causing historic growth.
- This pulled forward demand that would have appeared later, possibly leading to weaker investment in upcoming quarters.