The US economy is expected to record its worst quarter in two years 2022-04-28 05:30:09

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US economic activity, measured by gross domestic product, is expected to grow at an annualized pace of just 1.1% in the first quarter of the year, according to consensus forecasts from Refinitiv. The The Fed’s GDP model is now in Atlanta It expects a seasonally adjusted annual growth rate of just 0.4% as of Wednesday — down from 1.3% as of mid-April.

If any of the predictions prove correct, that would be a sharp decline from the 6.9% growth pace in the last quarter of 2021 and would make it the worst three-month period since the pandemic recession in the second quarter of 2020.

Economists predicted that growth would eventually slow from the pace seen during the grand reopening. But even compared to the pre-pandemic periods, when the US economy grew steadily at a more moderate pace, something as low as 1% would be disappointing.

How did this happen?

For example, companies rebuilt their inventories in the last three months of last year, which boosted economic activity. But that faded in the first quarter of 2022, according to economists from Action Economics.

The quarter also started with the Omicron wave of the coronavirus, which led to a spike in infections and a renewal of restrictions aimed at containing the virus. While the effects are short-lived, the long-term effect is only now becoming apparent.

Americans also had concerns about higher pricesNot to mention the Russian invasion of Ukraine, which led to higher gas prices. in March , Retail sales data From the Census Bureau showed that overall sales were only boosted by spending at gas stations, where sales jumped nearly 9%.
It underscores an important point: So far, US consumers still spend freelyBut much of that appears to be due to higher prices everywhere rather than increased consumption.
Although Americans still have pent-up savings from the pandemic lockdown days, Inflation levels not seen in 40 years Don’t make people go on extravagant shopping trips. Ultimately, this reality will catch up with US economic growth, which needs healthy consumer spending.

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