U.S. economy declines by 1.5% in Q1 2022

Workers work at a factory in Vernon, Los Angeles, California, April 16, 2020. Photo by THX/TTXVN

According to Washington, the decline is partly due to greater trade disparities, as the country spends more on imports than other countries. The trade gap reduced first-quarter GDP by 3.2%. And slower stockpiles of goods in stores and warehouses, which had accumulated inventory in the previous quarter for the 2021 holiday shopping season, fell nearly 1.1 percent from GDP between January and March 2022. Analysts say the U.S. economy is likely to continue to grow in Q2 2022.

This is the first GDP decline since Q2 2020-which has been hit by the recession caused by the COVID-19 pandemic - and followed a sharp increase of 6.9% in the last three months of 2021. The United States is still under pressure from high inflation, which has caused particularly serious difficulties for lower-income households, with many of them black. Although many American workers have received significant wage increases, their wages in most cases do not keep up with inflation.

In April 2022, consumer prices rose 8.3 percent from a year ago, just below the fastest increase in four decades, set a month earlier. High inflation is also putting political pressure on President Joe Biden and Democrats as midterm elections are approaching. A poll this month by The Associated Press - NORC found that Biden's approval rating reached its lowest level during his presidency - with only 39% of respondents expressing approval-when inflation was a frequently mentioned factor.

However, the U.S. economy is generally stable, despite the possibility of decline. Consumer spending - the central factor of the economy-remained stable, rising at a rate of 3.1% annually in Q1 2022. Business investment in equipment, software and other items to improve productivity has increased at a rate of 6.8% annually in the previous quarter. And a strong job market is giving workers more conditions to maintain spending. Employers added more than 400,000 jobs in 12 consecutive months, and unemployment was low for nearly half a century. Businesses are advertising a lot of jobs and on average there are about two job opportunities for every unemployed American.

The economy is widely expected to continue to grow in the current quarter. In a survey published this month, 34 economists told the Federal Reserve Bank of Philadelphia that expect GDP to grow at a rate of 2.3% annually in Q2 2022 and 2.5% for the entire year 2022. However, the forecast is far lower than the estimate of 4.2% growth for the current quarter in the previous Philadelphia Fed survey in February.

In addition, significant uncertainties are covering the prospects of the U.S. and global economies. The Russian-Ukrainian conflict has disrupted trade in energy, grain and other commodities, and has caused fuel and food prices to rise significantly. China's response to the COVID-19 pandemic has also slowed the growth rate of the world's second-largest economy and exacerbated Monday's global supply chain congestion.

The Federal Reserve has begun sharply raising interest rates against the fastest inflation rate the U.S. has suffered since the early 1980s. Economists Lydia Boussour and Kathy Bostjancic of Oxford Economics warn the possibility of a recession is increasing. Meanwhile, higher interest rates on loans seem to be slowing down at least one important sector of the economy-the housing market. Last month, sales of existing and new homes showed signs of slowing down.