A state’s gross domestic product – the broadest measure of economic activity – declined at an annual rate of 1.4% between January and March in a surprising reversal of the previous year’s strong growth.
While one quarter isn’t trending yet, it’s a warning sign of how the recovery might unfold: Two consecutive quarters of declining growth meet a popular definition of stagnation.
Despite the low numbers, President Joe Biden rated the US economy as “resilient in the face of historic challenges,” in a statement released Thursday morning.
“While last quarter’s growth estimates were affected by technical factors, the United States faces the challenges of Covid-19 worldwide, Putin’s unprovoked invasion of Ukraine, and global inflation from a position of strength,” the statement said.
What led to the decline?
Most of the first quarter fell in the United States It was due to lower inventory investment, which was booming in the final months of 2021.
That means lower GDP should be taken into account, Ryan Sweet, senior director of economic research at Moody’s Analytics, warned Wednesday before the data was released.
Exports and government spending also fell, while imports rose. Consumer spending, which is vital to the economy, increased as prices continued to rise. Americans spent more on services, led by health care. who – which To offset a slight decrease in spending on goods, which has diminished due to lower spending on gas.
Gas prices have skyrocketed in response to the Russian war in Ukraine, which has rocked energy markets around the world.
The price index that tracks personal consumption expenditures rose 7% in the first three months of the year, or 5.2% when energy and food prices are excluded.
“It is unfortunate that this GDP rate did not meet expectations, but not surprising as the US economy remains extremely volatile with geopolitical turmoil caused by the war in Ukraine, the global supply chain crisis, rising inflation and the ongoing COVID-19 pandemic,” Steve said. Rick, chief economist at CUNA Mutual Group, in comments via email. All of these factors have led to a reduction in the GDP growth rates around the world.
A second estimate of first-quarter GDP growth will be published at the end of May.
Correction: An earlier version of this story incorrectly stated that the economy expanded in the first quarter of the year.
This is an evolving story. It will be updated.
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