U.S. economy shrinks 1.4% during the first quarter of 2022

May 3, 2022

After more than a year of rapid growth, the U.S. economy unexpectedly shrank at a 1.4% annualized rate during the first three months of 2022, according to The Washington Post. In 2021, the U.S. economy grew by 5.7%—the fastest full-year pace since 1984.

The new data is raising concerns about a future recession amid inflationary pressures and uncertainty regarding the war in Ukraine.

“There are definitely clouds on the horizon,” said Kenneth Rogoff, an economics professor at Harvard University and former International Monetary Fund chief economist. “You can’t read too much into this number, but I do have significant concerns about the risk of recession, both in the U.S. and also in Europe and China, possibly all reinforcing each other like the perfect storm.”

Among the factors affecting the economy at the beginning of 2022 were a reduction in retailers’ inventory purchases and a growing gap between U.S. exports and imports. Additionally, many businesses bought less inventory than they typically would in early 2022 because they had leftover merchandise from late 2021 when they stocked up amid supply chain shortages and delays.

However, many parts of the economy reportedly remain strong. Employers have created more than 400,000 jobs for 11 consecutive months, with the unemployment rate reaching a new pandemic low. And despite higher costs, families and businesses continue to spend and invest.

Tags: Trends

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