The Gross Domestic Product (GDP) of the United States fell 1.4% annualized in the first quarter of 2022, as the Omicron variant and the reduction in public spending affected consumers and companies, according to data from the Bureau of Economic Analysis (BEA, for its acronym in English).
The result was much worse than estimated by analysts, who had forecast a slight expansion and came after the economy grew 6.9% in the last quarter of 2021.
Economists surveyed by the Reuters agency had forecast that the economy would grow at a rate of 1.1 percent.
The United States is dealing with record inflation of 8.5% per year. The increase in the prices of fuel and other inputs due to the war between Ukraine and Russia, in addition to the problems in global supply chains, have been factors for fear that the US economy will fall into recession.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the shortfall last quarter was partly due to companies importing more to rebuild inventories and growth could pick up in the second quarter of 2022.
The economy is not slipping into recession. Net trade has been hit by a surge in imports, especially of consumer goods, as wholesalers and retailers have tried to rebuild inventories,” Shepherdson wrote in an analysis.
The Department of Commerce explained in a statement that “the fall in GDP reflects the reduction in private investment, exports, (…) public spending by the federal state and local governments, while imports increased.”
Durable goods drove the rise in imports, while the report said the private investment shortfall was mostly due to wholesale trade goods, particularly motor vehicles, which have been in short supply due to a global shortage of semiconductors.
The drop in government spending was also due to both lower defense spending and the expiration of government programs that provided aid to families.
Additionally, consumer spending was strong and business investment in equipment accelerated considerably. The result is a measure of domestic demand (excluding trade, stocks and government spending) that rose sharply from the fourth-quarter pace of 2.6 percent. Final sales to private domestic buyers represent approximately 85% of aggregate spending.
economy is resilient
Despite the negative result in GDP, the US president, Joe Biden, was confident that his country’s economy is “resilient”.
“The US economy, driven by working families, continues to be resilient in the face of historical challenges,” the president mentioned at a press conference and stressed that it was “technical factors” that affected economic performance and assured that he is not worried about a recession risk.
“The United States faces the challenges of Covid-19, Russia’s unwarranted invasion of Ukraine, as well as global inflation,” the president said in a statement shortly before.
Requests for unemployment aid fall
The Labor Department reported that initial claims for state jobless benefits fell by 5,000 to a seasonally adjusted 180,000 in the week ending April 23.
President Joe Biden assured that the American economy, fueled by working families, remains resilient in the face of historic challenges and ruled out a recession.