During the first quarter of 2022, U.S. gross domestic product contracted 1.4 percent following a 6.9 percent annual growth rate in the previous quarter. It was the worst quarter since the COVID-19 pandemic began in early 2020. Here's how economists, analysts, and politicians are reacting.
1. Still 'resilient'
Despite the GDP contraction, Oxford Economics U.S. economist Lydia Boussour told The Associated Press the report "isn't as worrisome as it looks" and shows "an economy with solid underlying strength that demonstrated resilience in the face of Omicron, lingering supply constraints, and high inflation."
Economists pointed to a 0.7 percent growth in consumer spending, in particular. "Domestic spending was remarkably resilient," Grant Thornton chief economist Diane Swonk noted to The New York Times. "It actually accelerated." Similarly, The Conference Board CEO Steve Odland told CBS News the report is "not quite as worrisome as it would seem" because "the most important thing" is that "consumers and businesses continued to spend." PNC chief economist Gus Faucher predicted "growth will resume in the second quarter" and said the labor market is still "in excellent shape."
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While White House Chief of Staff Ron Klain acknowledged the GDP number was "sour," President Biden said the economy "continues to be resilient in the face of historic challenges."
2. A 'wake-up call'
On the other hand, Independent Advisor Alliance chief investment officer Chris Zaccarelli told Fox Business the "shock drop" in GDP is a "warning sign," which should serve as a "wake-up call that the economy isn't as strong as we all thought." The report "reminds us of the reality that growth has been great, but things are changing and they won't be that great going forward," State Street Global Advisors chief economist Simona Mocuta told CNBC.
While the economy is "still showing some resilience," BMO Capital Markets senior economist Sal Guatieri told Reuters, the report "signals the start of more moderate growth this year and next, largely in response to higher interest rates."
And Moody's Analytics chief economist Mark Zandi warned The Washington Post that when the Federal Reserve "has to raise interest rates as far as they say they're going to, recession risks are high," while Harvard University economics professor Kenneth Rogoff told the Post he has "significant concerns about the risk of recession."
3. A midterm 'cataclysm'?
Republican politicians quickly placed blame on Biden. "After wasting trillions that we don't have and driving inflation to record levels, GDP growth is now negative," said Sen. Tom Cotton (R-Ark.). "Workers are poorer and our economy is contracting. Joe Biden's economic record is nothing short of a catastrophe."
Tony Fratto, former White House spokesperson for former President George W. Bush, told Politico prior to the report's release the "politics of negative growth, even for a quarter — at this time, in a midterm election year — are really, really risky for the White House." After the numbers came out, CNN editor-at-large Chris Cillizza sounded the alarm, writing that the news was an "absolute body blow to Democrats already reeling amid growing economic concerns ahead of the 2022 midterm election." Cillizza predicted, "If things stay roughly where they are today — in terms of economic measures like GDP and CPI and Americans' perceptions of the state of the economy — Democrats will experience a cataclysm at the ballot box this fall."
