In what is being described by financial experts and economists as a surprising development, the nation’s Gross Domestic Product dropped by 1.4% in the first three months of this year.
That decline is even more unexpected given that during the final quarter of last year, the GDP was up by a healthy just under 7%.
In a released report, the Bureau of Economic Analysis primarily attributed the GDP decline to decreases in exports and private inventory investments.
The trend of the numbers was also buttressed by a surge in imported goods.
The GDP is a monetary measure of the market value of all services and goods during a defined period. It is regarded as a useful metric for measuring the country’s economic progress.
Before the Covid-19 outbreak in early 2020, the nation’s GDP had been enjoying a steady yearly increase between 2011 and 2019 of anywhere from 1.5% to 2.9%. In 2020, it dropped by a precipitous 3.4%, its largest decrease in three decades.
But the overall 2021 GDP increase of 5.7%, showing a recovery as the nation moved to a post-pandemic economy, was the greatest recorded increase in 30 years.
The BEA said the decline in private inventory investment during the first three months of this year was joined by decreases in wholesale trade, primarily with motor vehicle sales. But it also pointed to another factor that may surprise analysts in the wake of the massive Infrastructure Investment and Jobs Act: a decline in federal spending.
That decline, said the BEA, “primarily reflected a decrease in defense spending on intermediate goods and services.”
Despite the downward trend, many analysts say the overall 2022 picture remains promising. The latest data, says the Washington Post, “masked some signs of strength, like consumer spending.”
Contends the Wall Street Journal: “The U.S. economy shrank in the first quarter as supply disruptions weighed on output, but underlying strength in consumer and business spending suggested growth will soon resume.”
“The first GDP contraction since the recession ended is sure to ignite fears that the economy is stalling out,” Lydia Boussour, a senior analyst at Oxford Economics, wrote in the wake of the BEA report.
But Boussour argued that “beneath the weak headline print, the details of the report point to an economy with solid underlying strength and that demonstrated resilience in the face of Omicron, lingering supply constraints, and high inflation.”
In a statement from the White House, President Biden contended that the most recent GDP performance was “affected by technical factors,” but added that the overall economy “continues to be resilient in the face of historic challenges.”
“Last quarter, consumer spending, business investment, and residential investment increased at strong rates,” Biden remarked.
By Garry Boulard
