Report: Economy shrank last quarter for first time since beginning of pandemic

The U.S. economy shrank in the first three months of the year, and faces threats from high inflation and rising interest rates.

Economists are however predicting a return to growth for the rest of 2022 based on the strength of the job market and consumer spending. The first quarterly decline in gross domestic product since the pandemic hit in 2020, which is a 1.4% drop on an annualized basis is not likely a prelude to recession, economists say. 

When speaking to reporters, Biden touted strong consumer spending and low unemployment numbers, and argued that the contraction was but a blip after a period of the strongest growth since 1984. 

“What you’re seeing is enormous growth in the country, that was affected by everything from COVID, and the COVID blockages that occurred along the way,” Biden said. “No one is predicting a recession now, they are, some are predicting a recession in 2023. I’m concerned about it.”

“But I know one thing, if our Republican friends are really interested in doing something about dealing with economic growth, they should help us continue to lower the deficit,” Biden continued, calling for “a tax code that is actually one that works.”

In a previous statement responding to the concerning new data, Biden insisted that the US economy “continues to be resilient in the face of historic challenges.”

“While last quarter’s growth estimate was affected by technical factors, the United States confronts the challenges of COVID-19 around the world, Putin’s unprovoked invasion of Ukraine, and global inflation from a position of strength,” the president said. 

Biden did not elaborate on what “technical factors” he blamed for shrinking growth.

Bloomberg economics said that “A substantial drag from trade — a result of weak exports amid a global growth slowdown, coupled with robust imports due to strength in both domestic demand and the dollar — will prove temporary, with trade flows normalizing as the year progresses. Consumer and business spending is gaining momentum going into the second quarter, which we estimate will keep GDP growth above trend for the year.”