honey, i shrunk the economy
U.S. economy contracts 1.4 percent, but consumers keep spending
U.S. gross domestic product unexpectedly contracted 1.4 percent in the first quarter of 2022, "though solid consumer and business spending suggest growth will resume," The Wall Street Journal reports.
The decline marks both a "sharp reversal" from the 6.9 percent annual growth rate in Q4 and the economy's "weakest quarter" since the pandemic began in the spring of 2020, per the Journal.
The contraction is mostly attributable to a widening trade deficit and lagging inventory investment, The New York Times writes. Lower government spending also had a hand in slowing growth.
Even with the shrinkage, many economists believe the economy "remains on track to resume modest growth in the second quarter and beyond," the Journal writes. For one thing, consumer spending remains strong, having grown 0.7 percent in the first quarter despite Omicron variant-related virus restrictions, the Times adds.
Rising interest rates are also dragging growth, part of the Federal Reserve's plan to bring down historically high levels of inflation.
Thursday's report does not mean a recession is undoubtedly on its way, The Associated Press notes (though Deutsche Bank has predicted differently); economists expect to see a rebound in the coming months.
"The report isn't as worrisome as it looks," Lydia Boussour of Oxford Economists told AP. "The details point to an economy with solid underlying strength that demonstrated resilience in the face of Omicron, lingering supply constraints, and high inflation."