U.S. gross domestic product shrank at a 1.4% annual rate in the first quarter of 2022.
The decline in U.S. gross domestic product marked a sharp reversal from a 6.9% annual growth rate in the fourth quarter, the Commerce Department said Thursday. The drop also marked the weakest quarter since spring 2020, when the Covid-19 pandemic and related shutdowns drove the U.S. economy into a deep but short recession.
The drop in GDP stemmed from a widening trade deficit, with the U.S. importing far more than it exports. A slower pace of inventory investment by businesses in the first quarter—compared with a rapid buildup of inventories at the end of last year—also pushed growth lower. In addition, fading government stimulus spending related to the pandemic weighed on GDP.
number of people receiving unemployment benefits, a proxy for layoffs, fell to the lowest level since 1970. And in the January-March quarter, businesses and consumers increased their spending at a 3.7% annual rate after adjusting for inflation.
Economists consider that trend a better gauge than overall GDP of the economy’s underlying strength. Most analysts expect the steady pace of spending to sustain the economy’s growth, though the outlook remains highly uncertain.