FOX Business host Larry Kudlow ‘looks under the hood’ of the GDP report on ‘Kudlow.’
The liberal media and their pals on Wall Street are talking about recession, because GDP in the first quarter of 2025 was scored with a slight decline of three-tenths of one percent.
And those afflicted with the disease of ‘Trump derangement syndrome’ are now breathlessly predicting a recession in the second quarter.
But, if you look under the hood of the GDP report and carefully parse through the numbers, what you actually come up with is a rather strong economy that’s growing at something like 3%.
That’s right.
President Donald Trump has barely begun his second term, but take a look already at core GDP – which takes out the fluky trade import numbers from tariff front running and looks at just the heart of GDP, which is private sector consumption plus private sector business investment.
Well, looking at core GDP, you see an actual increase in the first-quarter economy – of 3%, no less.
And, then, if you look deeper into the numbers, you find even better news.
Private business investment is up, while government spending is down.
That’s right. Business fixed investment increased nearly 10% at an annual rate in the first quarter.
And, even better, business equipment and machinery – which is an incredibly important harbinger of productivity, job increases, and real wage hikes – rose an incredible 22.5%.
There’s no recession there.
Out of the entire GDP report, 22.5% is the most important number.
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What’s going on here? Why are the recessionistas so badly wrong? What have they missed?
Well… President Trump’s one, big, beautiful bill will pass both houses of Congress, probably around the Fourth of July holiday, only a few months away.
Mr. Trump has said repeatedly that he will give business investment a 100% expensing write-off.
Plus, he will provide factory investment and building the same 100% immediate depreciation.
And, crucially, he has said that all of this will be retroactive – to January 20, 2025.
On top of all that, let’s not forget the corporate tax rate for Made in America goods would drop from 21 to 15%.
So, what’s actually happening is that businesses are front-running the big beautiful tax cut that will be coming their way.
It’s a phenomenal story.
It’s a story of re-shoring.
It’s a story of how the business tax cuts – along with the new personal tax cuts for service worker tips, overtime, and seniors’ social security benefits – will far outweigh any drag from tariffs.
FOX Business host Larry Kudlow reflects on President Donald Trump’s efforts to secure the border and restore the economy on ‘Kudlow.’
Here’s another point: in March, the personal consumption deflator came in at 0.0%.
The core deflator also came in at 0.0%.
And don’t forget the consumer price index in March actually fell one-tenth of one percent.
All of this inflation progress sets up a Federal Reserve cut.
That’s right, a rate cut should be coming.
And, lastly, focusing on the GDP numbers again, there’s a math problem at work.
Yes, imports jumped a huge $333 billion in the first quarter, but inventories only increased $140 billion.
That leaves $193 billion unaccounted for. There’s a gap. Where did all those trade imports go?
Did the roughly $200 billion gap between imports and inventories just… evaporate?
The pencil pushers over at the Commerce Department clearly can’t count.
So, I’m just going to take that missing $200 billion and add it into overall GDP.
If they subtracted it, I will choose to simply add it back in.
And, when I do that, the real GDP growth in 1Q 2025 comes out to be 3.2%. Even better than private domestic sales.
And that sets up an economy boosted by tax cuts and deregulation that can roar – perhaps in the second quarter, but certainly by the second half of the year and well into 2026.
