In Q1 of 2022, the United States economy contracted 1.5% on an annualized basis, as per revised data that the Bureau of Economic Analysis released on Thursday. The economists that Revinitive surveyed were expecting an annual contraction of 1.3% that’s seasonally adjusted.
The new downward revision for GDP, which serves as the broadest measure of goods and services that have been produced across the economy, follows a 1.4% contraction that was previously reported. This is the first GDP drop since Q2 2020, followed by a 6.9% expansion in the last quarter of 2021.
This contraction was partly attributed to the country spending more money on importing goods and products from other countries than on U.S. exports. The trade gap slashed 3.2 percentage points from Q1’s GDP. The slower restocking of goods in warehouses and stores also contributed to the said weakness. These shops and warehouses have built up their inventories in the quarter before the 2021 holiday shopping season. This slashed almost 1.1 percentage points off the January-March GDP.
This contraction data comes as inflation is still running near a 40-year high. It weighs on growth, with the consumer price index, a broad-ranging measure of goods and services, going up by 8.3% compared to a year ago. Prices went up by 0.3% in the one month period from March. Average hourly earnings also decreased by 0.1% in March, on a monthly basis, when the inflation spike is being accounted for. Meanwhile, real earnings on an annual basis went down by 2.6% in April.