GDP Rate of Growth Declines to 1.4% in Q1, According to Advance Estimate
Washington, DC, April 28, 2022-Real gross domestic product (GDP) decreased at an annual rate of 1.4% in Q1 2022, according to the advance estimate released by the Bureau of Economic Analysis.
In Q4, real GDP increased 6.9%.
The GDP estimate released today is based on source data that are incomplete or subject to further revision by the source agency. The second estimate for Q1, based on more complete data, will be released on May 26.
The economy was depressed by a number of factors, including Omicron, a decline in auto sales due to the chip shortage and the snarled supply chain.
According to the Wall Street Journal, “The decline in first-quarter gross domestic product marked the weakest quarter since spring 2020, when the Covid-19 pandemic and related shutdowns drove the U.S. economy into a deep-albeit short-recession.
“The decline in GDP stemmed from a slower pace of inventory investment by businesses in the first quarter, compared with a rapid buildup of inventories at the end of last year. A widening trade deficit-with the U.S. importing far more than it exports-also pushed growth lower. Fading government stimulus spending related to the pandemic also weighed on GDP.
“Despite the slip, many economists think that overall the economy remains on track to resume modest growth in the second quarter and beyond, in part because consumers and businesses are continuing to spend.
“‘It’s really hard for the economy to grow rapidly once you’ve recovered to a substantial degree,’ said David Berson, chief economist for Nationwide Mutual Insurance Co.
“Also weighing on growth are rising interest rates as the Federal Reserve combats inflation. Central bank officials lifted their benchmark rate in March by a quarter percentage point from near zero, and they have signaled more increases are likely to follow.
“Looking ahead, economists surveyed by The Wall Street Journal estimate GDP rising 2.6% in the fourth quarter of 2022 from a year earlier, matching 2019 annual growth, but logging in well below 5.5% growth recorded last year.
“The labor market is a key source of economic strength right now. Jobless claims-a proxy for layoffs-are hovering near historically low levels as employers cling to employees amid a shortage of available workers. Businesses are hiring and ramping up wages, supporting consumer spending, the economy’s main driver.
“High inflation is cutting into households’ purchasing power. Consumer prices rose 8.5% in March from a year earlier, a four-decade high. Elevated inflation is wiping away pay gains for many workers: average hourly earnings were up 5.6% over the same period.
“Fast-rising prices are also challenging many businesses.”