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.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
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."
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Brigid Kennedy worked at The Week from 2021 to 2023 as a staff writer, junior editor and then story editor, with an interest in U.S. politics, the economy and the music industry.
-
Quiz of The Week: 21 – 27 June
Have you been paying attention to The Week's news?
-
The Week Unwrapped: How do you turn plastics into paracetamol?
Podcast Plus, what is the Wagner Group doing now? And why is it so hard to find a job after university?
-
The week's best photos
In Pictures A daring leap, a plastic protest, and more
-
Economists fear US inflation data less reliable
speed read The Labor Department is collecting less data for its consumer price index due to staffing shortages
-
Tariffs were supposed to drive inflation. Why hasn't that happened?
Talking Points Businesses' planning ahead helped. But uncertainty still looms.
-
Crypto firm Coinbase hacked, faces SEC scrutiny
Speed Read The Securities and Exchange Commission has also been investigating whether Coinbase misstated its user numbers in past disclosures
-
Starbucks baristas strike over dress code
speed read The new uniform 'puts the burden on baristas' to buy new clothes, said a Starbucks Workers United union delegate
-
Warren Buffet announces surprise retirement
speed read At the annual meeting of Berkshire Hathaway, the billionaire investor named Vice Chairman Greg Abel his replacement
-
Trump calls Amazon's Bezos over tariff display
Speed Read The president was not happy with reports that Amazon would list the added cost from tariffs alongside product prices
-
Markets notch worst quarter in years as new tariffs loom
Speed Read The S&P 500 is on track for its worst month since 2022 as investors brace for Trump's tariffs
-
Tesla Cybertrucks recalled over dislodging panels
Speed Read Almost every Cybertruck in the US has been recalled over a stainless steel panel that could fall off