The US economy has shrunk for the first time since the pandemic recession-nationwide
The U.S. economy shrank in the previous quarter for the first time since a pandemic recession Although hit two years ago and shrunk at an annual rate of 1.4%, consumers and businesses continued to spend on signs of underlying resilience.
Stable spending suggested that the economy could continue to expand this year Federal Reserve Plans to aggressively raise interest rates to combat the surge in inflation. First-quarter growth was hampered primarily by delays in replenishment of goods in stores and warehouses and a sharp decline in exports.
The Ministry of Commerce’s estimate of Thursday’s gross domestic product (total gross domestic product and services) for the first quarter of Thursday was well below the annual growth rate of 6.9% for the fourth quarter of 2021. And as a whole in 2021, the economy grew 5.7%. St., the highest calendar year expansion since 1984.
The economy is facing pressure that raises its basic health concerns and raises concerns about the possibility of a recession. Inflation is putting pressure on households as gas and food prices skyrocket, borrowing costs rise, and Russia’s invasion of Ukraine and China’s blockade of COVID have shaken the global economy.
Nevertheless, the US employment market, which is the most important pillar of the economy, remains strong. And in the January-March quarter, businesses and consumers increased their spending at an annual rate of 3.7%, adjusted for inflation.
Economists believe that trend is a better gauge than the overall GDP of the underlying strength of the economy. Most analysts expect a stable pace of spending to sustain economic growth, but the outlook remains very uncertain.
The slowdown in the previous quarter was driven by a surge in inventories as companies restocked in anticipation of holiday spending, following strong growth in the final quarter of 2021. Companies continued to rebuild their inventories last quarter, but that was slow and hindered process growth.
While US exports increased slowly, imports also surged in the January-March quarter as businesses and consumers bought more goods from abroad. The inequality widened the trade deficit and was deducted from quarterly growth.
The weak growth rate of the economy as a whole contrasts with the vitality of the employment market. The unemployment rate is 3.6%, almost returning to the half-century lows reached just before the pandemic. Layoffs have historically reached low levels, as employers suffering from labor shortages are tightly detaining workers.
Wages are steadily rising as businesses compete to attract and retain workers, which tends to help consumers maintain their spending capacity. But at the same time, that spending contributed to fuel inflation, reaching 8.5% in March compared to 12 months ago.
Federal Reserve Chair Jerome Powell has signaled a series of rapid rate hikes to combat higher prices. The Federal Reserve will raise key short-term interest rates by 0.5 percentage points next week. This is the first increase since 2000. Subsequent Fed meetings. They will be one of the fastest Fed rate hikes in decades.
Powell said near-record levels of job vacancies, healthy consumer spending, and unusually low unemployment allow the FRB to slow the economy enough to curb inflation without causing a recession. I’m sure. However, most economists are skeptical that the Fed will be able to reach that goal with inflation as high as possible.
© 2022 The Canadian Press
https://globalnews.ca/news/8793247/us-economy-shrank-2022/ The US economy has shrunk for the first time since the pandemic recession-nationwide
