WASHINGTON — The U.S.
The first quarterly decline in gross domestic product since the pandemic hit in 2020 – a 1.4% drop on an annualized basis – is not likely a prelude to recession, economists say.
economy, even in the face of challenges from the pandemic, the war in Ukraine and the Federal Reserve’s plans to raise interest rates to fight inflation.
“The report isn’t as worrisome as it looks,” said Lydia Boussour, lead U.S.
The job market — the most important pillar of the economy — remains robust, with the unemployment rate near a 50-year low of 3.6%, and wages rising steadily.
Supply chain disruptions in China and elsewhere are still a pandemic-era reality, and the war in Ukraine is contributing to higher inflation, which erodes consumers’ spending power.
The first quarter’s weak showing contrasts with last year’s robust rebound from the pandemic, which was fueled in part by vast government aid and ultra-low interest rates.
Compounding Biden’s difficulties, Russia’s invasion of Ukraine and rising COVID cases overseas are weighing on the economy and heightening inflation pressures.
Yet despite supply chain snags tied to the pandemic, MOOYAH still plans to open 20 more restaurants this year.
Although imports surged in the first quarter, COVID lockdowns in China are likely to perpetuate supply shortages this year.
Thursday’s GDP report showed that consumers are adjusting their spending patterns as the pandemic fades and as higher costs for food and gas eat into household budgets.
The Fed had hoped that such a shift would bring down inflation, as goods prices have shot up more than services in the past year.
The Fed is set to raise its key short-term rate by a half-percentage point next week, the first hike that large since 2000.
Powell is betting that with job openings at near-record levels, consumer spending healthy and unemployment unusually low, the Fed can slow the economy enough to tame inflation without causing a recession.