Contraction

George K · wrote on 28 Apr 2022, 12:59

Gross domestic product contracted at 1.4% annual rate

The decline in GDP stemmed from 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. A widening trade deficit—with the U.S. importing far more than it exports—also pushed growth lower. Fading government stimulus spending related to the pandemic also weighed on GDP.

Despite the slip, many economists think that overall the economy remains on track to resume modest growth in the second quarter and beyond, in part because consumers and businesses are continuing to spend.

“It’s really hard for the economy to grow rapidly once you’ve recovered to a substantial degree,” said David Berson, chief economist for Nationwide Mutual Insurance Co.

Also weighing on growth are rising interest rates as the Federal Reserve combats inflation. Central bank officials lifted their benchmark rate in March by a quarter percentage point from near zero, and they have signaled more increases are likely to follow.