According to the Commerce Department’s third and final estimate, the US economy shrank at an annual rate of 1.6% in the first quarter.
According to an early estimate released in late April, real GDP fell by 1.4%. The second estimate last month was revised to a 1.5% decrease.
The first-quarter GDP figures represent the US economy’s first contraction since the Covid-19 pandemic began.
The drop in real GDP reflected decreases in exports, federal government spending, private inventory investment, and state and local government spending, while imports, which are subtracted from GDP calculations, increased.
According to the report, non-residential fixed investment, personal consumption expenditures (PCE), and residential fixed investment all increased.
“In the first quarter, an increase in Covid-19 cases related to the Omicron variant resulted in continued restrictions and disruptions in the operations of establishments in some parts of the country,” the Department’s Bureau of Economic Analysis (BEA) said in the report.
According to the BEA, government assistance payments in the form of forgivable loans to businesses, grants to state and local governments, and social benefits to households are all examples of government assistance payments “all decreased as provisions of several federal programs expired or tapered off”.
With inflation at a four-decade high, economists are increasingly concerned that the Federal Reserve’s more hawkish stance will send the US economy into a recession.
Even Fed Chair Jerome Powell recently stated that a recession is “certainly a possibility,” though it is “not at all our intended outcome.”