Economic activity declined at an annual rate of 1.4%, a sharp reversal from last year when growth was the strongest since 1984.
President Joe Biden’s upbeat message that the economy is cruising along hit a troublesome speed bump on Thursday when the federal government reported that U.S. gross domestic product shrank during the first three months of 2022.
President Biden's $1.9 trillion coronavirus relief package was supposed to propel the economy to new heights that Democrats could then sell to voters in this year's midterm elections. But the muddled data has weakened the clarity of the president's pitch and emboldened Republican criticism. The biggest drag on GDP was an increase in imports, but a one-off glitch — a sharp drop in business inventories — was a key contributor to the overall drop. The inventory decline reflected the aftershocks of the pandemic, rather than the underlying health of the economy, the president said.
While he maintained that there would not be a recession this year, he conceded that it was a concern.To Republican lawmakers and some economists, the drop in GDP hinted at the risk posed by surging inflation. Consumers have grown skittish despite increases in their net worth. Russia's invasion of Ukraine has created the risk of oil, natural gas, and food shortages. Pandemic-related lockdowns in China indicate that supplies chains troubles will persist.
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