Negative GDP Growth, Inflation, Fresh Supply Chain Troubles Confront Economy | Local

The economic headwinds are getting stronger with negative GDP growth in the first quarter, inflation at 40-year highs and fresh supply chain troubles with China locking down major cities, ports and manufacturing hubs over fresh coronavirus fears.

The stresses are being felt from small businesses and the gas pumps of southern Oregon and northern California to locked down Chinese cities and ports.

The U.S. economy posted -1.4% economic growth in the first quarter, according to the U.S. Commerce Department. That is the first negative quarter for the U.S. economy since 2020 and the start of the pandemic.

Inflation is at its highest levels since 1981 spurred by higher energy and food prices. Gasoline prices in Oregon average $4.67 per gallon, according AAA.

That is up $1.40 per gallon from a year ago but down some from the record price of $4.74 per gallon set in March, according to AAA.

Gas prices average $4.62 in Klamath County, $4.86 in Grants Pass and $4.73 in Medford, according to April 29 pricing data from AAA.

A year ago crude oil was trading for $64 per barrel. Now, oil costs more than $105 per barrel with inflationary pressures and U.S. sanctions on Russian oil. Russia is one of the world’s largest oil producers while the U.S. is by the globe’s largest petroleum consumer.

“Pump prices will struggle to fall as long as the price of oil remains elevated. While pump prices have slipped from record highs set in March, consumers shouldn’t expect any dramatic drops this spring,” said Marie Dodds, public affairs director for AAA in Oregon and Idaho in a weekly analysis of the fuel price landscape.

In California, gas prices average $5.71 per gallon and diesel averages $6.39 per gallon. That includes prices ranging from $5.50 to more than $6 per gallon in California’s northern most counties.

Diesel prices have reached a national all-time high of $5.16 per gallon, according to GasBuddy which also tracks fuel prices.

U.S. Rep. Doug LaMalfa, a Republican representing northern California, said high inflation is hurting consumers, farmers and small businesses.

“Inflation is a tax on every American, but small businesses are taking a big hit. According to a new NFIB (National Federation of Independent Business) survey, 99% of small business owners reported that rising energy and fuel costs are negatively impacting their business and over 80% are now reporting that they have had to raise their prices for consumers to stay afloat. This administration’s policies have created an economy that actively hurts businesses and consumers,” said LaMalfa, a frequent critic of the Biden administration.

Pressure on Biden

Republicans are pushing Biden to open up more domestic oil drilling to help bolster supplies. They are also critical of ambitious spending programs proposed by the White House and Democrats on issues such as infrastructure and renewable energy.

Rougher economic waters are a political challenge for Biden and Democrats’ majorities in Congress as the November elections approach.

“Well, I’m not concerned about a recession. I mean, you’re always concerned about a recession, but the GDP, you know, fell to 1.4 percent,” Biden said Thursday when asked about the negative U.S. economic growth.

Two consecutive quarters of negative economic growth would put the U.S. economy into a recession. The combination of inflation and lower economic growth would amount to a stagflation issue similar to the economic woes of the late 1970s and early 1980s

“But here’s the deal: (We) also had — last quarter, consumer spending and business investment and residential investment increased at significant rates, both for leisure as well as hard products, number one,” Biden said.

U.S. Sen. Ron Wyden, D-Oregon, said Thursday he wants the Biden administration to up its efforts to take on price gouging — including encouraging consumers to call the Federal Trade Commission to report excessive prices.

“I write to express my concern that large corporations, particularly those in consolidated industries, appear to be taking advantage of inflation to pad their profits at the expense of American consumers,” Wyden wrote to FTC Chair Lina Khan on April 28. “As the federal agency tasked with protecting consumers, the Federal Trade Commission has a powerful tool already at its disposal: the ReportFraud.ftc.gov hotline. I encourage you to ensure consumers are aware they can report inflation-related price gouging at this hotline, and to examine how best to share those reports with the state enforcement agencies responsible for targeting corporate profiteers.”

Wyden, who chairs the influential Senate Finance Committee, is also pushing for more domestic production of key minerals used in technology applications and smart phones to help ease supply chain reliance on adversarial sources.

Chinese lockdowns

The troubled supply chain, which as seen shortages and delays in shipments of computer chips, foodstuffs, seasonal retail items and industrial components, is expected to see more troubles with fresh COVID lockdowns of major Chinese cities, ports and economic hubs.

The Chinese government has locked down Shanghai for weeks under its zero COVID policies.

Shanghai is home to the world’s largest port. A number of major U.S. companies including Oregon-based Nike, Walt Disney Co., Starbucks, Apple and the National Basketball Association (NBA) have major footprints and thousands of employees in cities such as Shanghai (which has been shutdown for weeks) and Beijing which could face similar restrictions.

Scores of cargo ships are parked in the East China Sea with ports and production plants closed down. That is poised to magnify supply chain delays and shortages and keep upward pressures on prices. China is Oregon’s leading trading partner.

In addition to the economic impacts, the Chinese government lockdowns are restricting movements for millions of people. There are also worries about roundups, separating children from parents and the cullings of dogs and other pets as well as forced quarantines and restrictions on free speech.

Major U.S. corporations and many lawmakers have been silent on the Chinese lockdowns and a number of major brands did not respond to requests for comment on the restrictive lockdowns.

Amnesty International, however, has criticized the Chinese government for censoring social media posts criticizing the lockdowns which has sequestered residents in apartments and led to food shortages.