American economy Contracted at an annual rate of 1.4% Supply disruptions weighed on production in the first quarter, although solid consumer and business spending resumed growth.
The decline in U.S. GDP marked a sharp reversal from a 6.9% annual growth rate in the fourth quarter, the Commerce Department said Thursday. The Govt-19 epidemic and related strikes have weakened the U.S. economy in the first quarter since the spring of 2020. A deep-narrow though-recession.
The drop formed The widening trade deficit, The United States imports more than it exports. The slow pace of businesses’ inventory investment in the first quarter — compared to the rapid build-up of inventory at the end of last year — slowed further growth. In addition, the fading of government incentive spending on epidemics weighed heavily on GDP.
Consumer spending, the main driver of the economy, rose at an annual rate of 2.7% in the first quarter, a slight acceleration from the end of last year. Businesses poured more money into equipment and research and development, triggering a 9.2% increase in business spending.
“The most important aspects of the domestic economy were better than they were at the end of 2021, and growth continued to rise,” said Diane Swong, Grant Thornton’s chief economist.
Two years after the epidemic, the U.S. economy faces challenges, epidemic-related supply disruptions, and Ukraine war, Labor shortages and high inflation. Central bank officials raised their standard rate by a quarter of a percentage point in March from close to zero to control inflation, and they Further increases are signaled to continue.
Many economists believe that the economy will be able to withstand higher interest rates and return to moderate growth in the second quarter and beyond as consumers and businesses continue to spend.
Amid lower Govt-19 cases and the removal of the remaining epidemic controls, Americans are spending more on services. Travel is a prime example: hotel occupancy rates have been rising since January, and more and more people are boarding flights.
Vt., George Lewis, co-owner of Brass Lantern Inn in Stowe, sees an increase in demand. His bed and breakfast visits to Maple Street have been selling rooms on some weekends this spring, a sharp change from the onset of the epidemic, as the inn relied on small business assistance to survive.
“People called: ‘Did you really sell?’ “Mr. Louis said, ‘I said,’ Yes, yes, we’re really sold out. ‘ ”
Still, Mr. Lewis is more interested in business next year. For one, it is not clear where inflation will be, he said. Prices for heating oil for warm rooms have already skyrocketed, as well as Mr. The cedar cheese that Louis uses in the egg yolks is the casserole breakfast he serves on Saturdays.
Consumer spending is another wild card, he added.
“We don’t know what people’ pocket books can accommodate after this year, ”he said. “Some people spend … it doesn’t matter what the cost is.”
GDP growth, percentage point contributions of selected categories
Cost
In services
Was great
Contributor.
Cost of goods
(pct. pts.)
A buildup
Inventories
Driven GDP
Too late
Last year …
… but not far away
This year
A recession
Weighs
On growth.
Trade
There was a shortage
One more drag
On growth.
Cost
In services
Was great
Contributor.
Cost of goods
(pct. pts.)
A buildup
Inventories
Driven GDP
Too late
Last year …
… but not far away
This year
A recession
Weighs
On growth.
Trade
There was a shortage
One more drag
On growth.
Cost
In services
Was great
Contributor.
Cost of goods
(pct. pts.)
A buildup
Inventories
Driven GDP
Too late
Last year …
… but not far away
This year
A recession
Weighs
On growth.
Trade
There was a shortage
One more drag
On growth.
Ingredients
Cost
(pct. pts.)
A buildup
Inventories
Driven GDP
Too late
Last year …
… but not far away
This year
A recession
Weighs
On growth.
Trade
Lack
There was even
A drag
Development.
Ingredients
Cost
(pct. pts.)
Looking ahead, according to a survey by The Wall Street Journal, GDP is projected to grow by 2.6% in the fourth quarter of 2022, which is in line with 2019 growth, but well below last year’s 5.5% growth.
Labor market Is now the main source of economic strength. Unemployment claims — the proxy for layoffs — are near historically low Last week it dropped to 180,000 Employers clung to employees amid a shortage of available workers. Businesses support consumer spending and hire wages.
However, high inflation reduces the purchasing power of households. Consumer prices rose 8.5% in March, the highest in four decades. Raised inflation wipes out the wage gains of many workers: average hourly earnings increased by 5.6% over the same period.
Rising prices are also a challenge for many businesses.
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Cratex Manufacturing Co., a 100-person manufacturer, manufactures and sells industrial lubricants to other manufacturers for use in the production of steel mills, jet-engine blades and metal castings. The San Diego-based company said prices of products such as resin and rubber have risen by 5% to 30% since last fall, said Ricker McCasland, chairman of Cratex.
At the same time, Cratex had to raise wages to retain workers.
“It’s a bet to be ahead of all of the rising costs,” he said. McCasland said. He added that price increases for raw materials are more than Cratex’s ability to recoup them through its own price increases.
Airlines, gas stations and retailers use sophisticated methods to adjust their prices according to price, demand and competition. WSJ’s Charity Scott explains what dynamic pricing is and why companies use it so often. Description: Adele Morgan
Write to Sarah Chaney Cambon at [email protected]
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