The gross domestic product of the largest economy in the world, the United States of America contracted by 1.4% in the first quarter of 2022. This represents a sharp fall from the 1.7% growth (6.9% annualized) recorded in Q4 2021.
This was announced by the Commerce Department of the US on Thursday, 28th April 2022.
According to the Bureau of Economic analysis, this represents the worst performance since the pandemic recession in the second quarter of 2020. Notably, gross domestic product, adjusted for inflation, declined 0.4 percent in the first quarter, or 1.4 percent on an annualized basis.
Factors that affected growth
- The decline was mostly as a result of the two most volatile components of the quarterly reports: inventories and international trade. Lower government spending was also a drag on growth. Measures of underlying demand showed solid growth.
- Although, consumer spending, which is the engine of the U.S. economy, grew by 0.7% in the first quarter despite the Omicron wave of the coronavirus, which restrained spending on restaurants, travel and similar services in January.
- Rising omicron infections at the start of the year hampered activity across board, while inflation surged at a level not seen since the early 1980s and the Russian invasion of Ukraine also contributed to the economic downturn.
- The decline in growth came due to a deceleration in private inventory investment, which helped propel growth on the back half of 2022. Other restraints came from exports and government spending across state, federal and local governments, as well as rising imports. An 8.5% pullback in defense spending was a particular drag, knocking one-third of a percentage point off the final GDP reading.
