U.S. GDP Unexpectedly Shrank at a 1.4% Pace in Q1

The U.S. economy unexpectedly shrank in the first quarter of 2022, the Commerce Department reported.

The nation’s GDP declined at an annualized rate of 1.4% between January and March, below analyst expectations of a 1% gain.

Results are an abrupt reversal to last year’s GDP rise at a 5.7% pace. On 2021 the economy recorded the fastest increase since 1984.

Consumer expenditures rose at 2.7% as inflation kept pressure on prices. However, as imports outweighed exports, the growing trade deficit cut 3.2 percentage points off growth.

The price index tracking personal consumption expenditure rose 7% in the first three months of the year, or 5.2% when stripping out energy and food prices.

According to analysts, results are a warning sign for how the recovery is going.

Deutsche Bank sees the chance of a “significant recession” late 2023 and early 2024, as the Fed is set to move faster to control inflation. Goldman Sachs sees about a 35% chance of negative growth a year from now.

While economists hope that the inflation is already reached a peak, only the April economic data can confirm a trend. The central bank is expected to raise interest rates next week, the second rate-hike of the year.