U.S. Economy Shrank in First Quarter, but Underlying Measures Were Solid
Source：New York Times
From：Taiwan Trade Center, Chicago
Update Time：2022/05/21
For the first three months of 2022 the US economy contracted. These contractions are due to supply constraints on inputs to US goods, a fall in demand abroad, and worldwide inflation. Economists in the US still claim that the post covid recovery is strong, consumer spending is still growing in spite of inflation. The Federal reserve has been trying to control inflation by raising interest rates which also slows demand but supply disruptions from Chinas covid lockdowns and the war and Ukraine are working against the policies. If and when inflation finally pushes consumer demand down
GDP in the US was down 0.4% in the first quarter of 2022. This was the first decline in GDP in the USA sine the beginning of the pandemic. Before 2022 the US economy has seen 1.7% growth in the final quarter of 2021. This decline could be contributed to high inventories at many US businesses and the reduction in government spending as COVID-19 programs fall away. Consumer spending was up 0.7% in the first quarter showing inflation has not taken to sever of a hold on the American population. Consumer prices in the US rose 7%.
American retailers have responded to consumer demand by importing more. At the same time, U.S. exports have lagged because of weaker economic growth abroad. As a result, the trade deficit has ballooned, taking more than 3% away from the change in gross domestic product in the first quarter. Currently 46% of all Americans rated their personal finances positively compared to 57% a year ago.
Melting Pot, an American fondue chain, has had to pay workers more and pay more for ingredients but has been able to keep customers coming in the restaurant even with rising menu prices. Business owners still do not know how long consumers will be able to stand the inflation on the menu. In the world of home building the US real estate market has been on fire with a shortage of housing in many cities and the cost of building new homes only going up. As mortgage rates rise the home buying market has the potential to cool off but so will the construction of new homes.
The long-term effect of these economic issues is still too complex to get a read on at this time. A tipping point will come wherein inflation fill finally turn down consumer spending but it is unknown when that will come. As interest rates rise the housing market will need to be watched closely as it is usually a barometer for overall economic health.
Source: https://www.nytimes.com/2022/04/28/business/economy/us-gdp-q1-2022.html