From the WSJ:
It gets worse. NGDP growth (a.r.) was significantly negative (-1.7%):
Leading John Makin to conclude:
There is one good result that might come from the very weak economic numbers being reported. The silly blather about rising inflation, that intensified in June as headline CPI inflation reached a year over year pace of 2.1 %, may end. Most of the modest rise in inflation is due to negative supply shocks: drought that has boosted food prices and rising Middle East tension that has boosted energy prices. The Fed doesn’t respond to higher inflation tied to negative supply shocks because any Fed tightening, a negative demand shock, would result in a collapse of output and employment. That lesson was learned the hard way during 1974-75 when central banks boosted interest rates in response to the jump in inflation caused by a jump in energy prices.[not quite, they did it again in 2008]
The US economy is weak and there isn’t much left in the Fed’s tool kit beyond a shift away from talking about when it will exit from zero interest rates to things it could do–like buying a wider range of assets–to at least sustain modest growth.
Update: Bad omens. In most of the pot war period, negative NGDP growth, when it ocurred, was always (until now) associated with a recession, although not all recessions experienced negative NGDP growth. The chart illustrates.