US economic growth fell 1.4 percent annualized in the first quarter of 2022 as the Omicron variant of Covid-19 and tapering of government spending hit consumers and business, government data said Thursday.
The result was far worse than the mild increase analysts had expected, and came after the economy had grown 6.9 percent in the final quarter of 2021.
The United States is dealing with record inflation as it recovers from the Covid-19 pandemic, even as prices for fuel and other components increase due to Russia’s invasion of Ukraine and global supply shocks, which have raised fears of a recession in the world’s largest economy.
Ian Shepherdson of Pantheon Macroeconomics said last quarter’s shortfall was partially a result of companies importing more to rebuild inventories, and growth could rebound in the second quarter of 2022.
“The economy is not falling into recession. Net trade has been hammered by a surge in imports, especially of consumer goods, as wholesalers and retailers have sought to rebuild inventory,” he wrote in an analysis.
The Commerce Department said the decrease in GDP was the result of less private inventory investment, government spending and exports, as well as a jump in imports.
Durable goods propelled the increase in imports, while the report said the shortfall in private investment was made up mostly of wholesale trade goods, in particular motor vehicles, which have been in short supply due to the global shortage of semiconductors.
Exports of nondurable goods decreased, though the data said that was offset by an increase in business services, particularly financial services.
The drop in government spending was fueled both by a decrease in defense spending as well as the expiration of government programs such as the child tax credit, which provided payment to families with children.