Has The Us Economy Really Shrunk In Early 2022 Is The Recession Near No Here S Why

Not bad, it seems. Maybe even good enough, economists say. “The first quarter was not as bad as it seems at first glance,” said Bill Adams, chief economist at Comerica Bank in Toledo, Ohio. Let’s start with the fall of 1.4% of GDP, the title that catches all the attention. GDP is the official scoreboard for the economy. Much of the decline was due to the US trade deficit, shrinking inventories and declining government spending. In total, these often volatile categories deducted 4.5 points from GDP. The real strength of the economy, however, lies in consumer spending and business investment. Both were quite resilient in the first quarter of the year. Consumer spending rose at a healthy 2.7% after inflation — the highest in three quarters — and business investment rose 7.3%. This was the largest increase in a year. “Although GDP declined in the first quarter, the US economy is not in recession,” said GN Focher, chief economist at PNC Financial Services. “Some temporary factors – trade, stocks and government – have caused the economy to shrink.” A better way to evaluate the performance of the economy, economists say, is to look at final sales to customers in the US. Simply put, this measure removes exports and stocks and focuses on how many things Americans buy from American and foreign sellers. These sales increased with a fixed annual clip of 2.6%, significantly increased from the second half of 2021. Subtract the reduced US government spending, and final sales to private customers — that is, households and businesses — increased by 3.7%. In this way, the US economy actually strengthened from January to March compared to the end of last year, when nominal GDP figures were much higher. GDP grew at a rate of 6.9% in the fourth quarter of 2021 and 2.3% in the third quarter. Can good times last? Economists predict that GDP will accelerate to 2% in the second quarter, but, as always, the devil will be in the details. The US could face more difficult times, with the Federal Reserve raising interest rates and increasing unrest abroad.