Do not be too quick to assume that the economy has put the worst behind us. The markets still harbor their fears and some of them are inconsistent. One reason to be wary of the first quarter GDP report is that it has some strange, inconsistent, and not sustainable trends embodied in it. Look at the most glaring oddity. GDP was weak largely because the trade deficit contracted sharply.
Imports are a derived demand.
They represent an excess demand of US demand relative to supply. Traditionally, imports run at a much faster speed than U.S. GDP growth. When we saw the monthly import report earlier in the month, many of us thought it reflected a sharp slowdown in U.S.demand. Another thing to be wary of is the large portion of GDP that is estimated. The two big swing items in the report, inventories and international trade, are based on one month of pretty good data, one month of highly tentative data and one month of totally 'made up' data.