The US economy has contracted for the first time since the pandemic

The U.S. economy contracted 0.4% in the first quarter of the year compared to the previous three months, and 1.4% at an annual rate, according to official data, despite Joe Biden’s high level of government spending, particularly in dealing with the crisis caused by the coronavirus epidemic.

According to some analysts, the number, which was worse than expected, was the result, in part, of the rebound in covid-19 cases due to the omicron variant and high inflation.

This is the first time the country’s economy has shrunk since the pandemic recession hit two years ago. But consumers and businesses continue to spend in a sign of underlying stability, the official report said.

But President Biden assured that despite the numbers, the economy remains strong.

“The U.S. economy, driven by working families, remains resilient in the face of historical challenges,” the president said, stressing that “technical factors” affected performance between January and March.

Consumer spending, which makes up two-thirds of activity in the U.S. economy, grew 2.7%, the Commerce Department said.

Stable spending has suggested the economy could continue to expand this year even as the Federal Reserve plans to raise rates aggressively to fight inflation.

In March, the United States registered the highest inflation rate since 1981, at 8.5%, driven primarily by higher energy, food and housing prices.

Growth in the first quarter of the year was mainly hampered by slower replenishment of goods in stores and warehouses and a sharp decline in exports.

The Commerce Department estimates on Thursday the first quarter gross domestic product – the nation’s total output of goods and services – is less than 6.9% annual growth in the fourth quarter of 2021. And for 2021 in In total, the economy grew 5.7%, the largest expansion in a calendar year since 1984.

Fear of recession

The economy is facing pressures that have raised concerns about primary health and its formation worries about a possible recession.

Inflation is hitting households as gas and food prices rise, borrowing costs rise and the world economy is shaken by Russia’s invasion of Ukraine and China’s COVID-19 lockdowns.

Even, the US labor market – the most important pillar of the economy – remains stable. And in the January-March quarter, businesses and consumers increased their spending at an annual rate of 3.7% after adjusting for inflation.

Economists believe that the trend is a better indicator than the GDP of the underlying strength of the economy.

Most analysts they expect a steady pace of spending to sustain growth of the economy, although the outlook remains highly uncertain.

The Department of Commerce explained in a statement that “the decline in GDP reflects a decline in private investment, exports, public spending by federal state and local governments, while imports have risen.”

Durable goods pushed on increased importswhile the report said the shortage in private investment was largely due to wholesale trade goods, particularly motor vehicles, which were short of supply due to the global shortage of semiconductors.

The decline in government spending was due to both the decline in defense spending and the expiration of government programs such as the child tax credit, which provided relief to families.

With information from agencies

CB