US reports drop in GDP after consumer spending fails to reach expected levels | Business News

The United States reported its first drop in economic output since the second quarter of 2020.

The US economy contracted at an annual rate of 1.6% in the first three months of the year, according to the latest figures from the country’s Commerce Department.

It follows a strong expansion of 6.9% in the last financial quarter of 2021.

The Commerce Department estimated last month that the economy contracted 1.5% in the first quarter, but released its final estimate on Wednesday and revised the figure downward.

Among the factors was consumer spending, which fell short of expected levels – up just 1.8% instead of the 3.1% expected.

Consumer spending accounts for about two-thirds of WE economic return.

Spending on major goods such as cars and leisure items was revised lower, while businesses piled up inventory at a faster rate than expected.

But some analysts remained optimistic.

Scott Hoyt, senior economist at Moody’s Analytics in West Chester, Pennsylvania, told Reuters: “The economy is extremely unlikely to be in a recession right now, despite the drop in GDP in the first quarter and the apparent weakness in growth. of production during the current quarter.

“Job growth remains strong, investment is rising, households and businesses have strong balance sheets.”

Like many global economies, the American consumer is feeling the effects of soaring inflation, pushed up by an increase in the price of basic necessities like energy.

Earlier this month, the US Federal Reserve increase in interest rates by three quarters of a percentage point – the largest increase in 28 years.

The benchmark rate is now in a range of 1.5% to 1.75%, levels not seen since the start of the coronavirus pandemic.

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