Analysts had actually expected growth.
(Photo: dpa)
Washington The US economy surprisingly took a downturn at the beginning of the year. Gross domestic product (GDP) fell by an annualized 1.4 percent in the first quarter, the Department of Commerce announced on Thursday based on an initial estimate.
Experts surveyed by Reuters, on the other hand, had expected growth of 1.1 percent after GDP had increased by 6.9 percent at the end of 2021. At that time, many companies had replenished their inventories that had been emptied during the pandemic, which provided a strong economic tailwind.
In addition to the inventory effect, experts also blame a larger foreign trade deficit for the current decline. By contrast, private domestic consumption and investments increased in the first quarter.
“The news that the US economy contracted in the first quarter of 2022 is superficially worrying. However, the economic weakness in the first quarter is exclusively due to burdens from foreign trade and lower inventory investments. Private non-inventory domestic demand, a kind of core GDP, grew at an annual rate of 3.7 percent in the first quarter of 2022,” LBBW economist Dirk Chlench told Reuters news agency.
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Ralfcircul from Helaba added: “The growth figures are disappointing with a minus and the economic momentum has suffered an abrupt damper.”
US growth figures are extrapolated for the year, i.e. annualized. They are therefore not directly comparable with growth data from Europe, where annualization is not carried out. To approximate a growth rate comparable to Europe, you would have to divide the US rate by four.
The Fed wants to raise interest rates
Despite the signs of an economic slowdown, the Fed implemented the turnaround in interest rates in March and intends to do more next week. An increase of half a point is expected on the financial markets, the largest jump in interest rates in over 20 years.
The Fed is reacting to the rapidly rising prices in the country. The US inflation rate rose to its highest level in more than 40 years at 8.5 percent in March, reducing consumer spending power.
More: America’s economy is threatened with recession