As you’ve probably heard, the U.S. economy contracted at a 1.4% annual rate in the first quarter of this year—the first time it’s shrunk since the beginning of the pandemic.
- “Gross domestic product was down sharply from a 6.9% annual growth rate in the fourth quarter, the Commerce Department said Thursday,” reported The Wall Street Journal (subscription).
Why it’s happening: NAM Chief Economist Chad Moutray broke down the causes for the decline.
- He attributed it to “reduced government spending, inventories, net exports and nondurable goods spending, offsetting stronger data for durable goods purchases, service-sector consumer spending and fixed investment.”
- “The data reflect negative impacts from supply chain disruptions, the Ukrainian invasion, slower global growth relative to the U.S., the spread of the omicron variant (earlier in the quarter) and inflation,” he added.
However. . . The news isn’t all bad, according to Moutray, and the data hints at “underlying strength in the U.S. economy that might not be obvious in the headline number.”
- “If you were to only include personal consumption expenditures and fixed investment, for instance, real GDP growth would have been 3.1% at the annual rate in the first quarter.”
- “The continued reopening of the economy and pent-up demand, especially in the service sector, remain encouraging.”
What manufacturers need: NAM President and CEO Jay Timmons said yesterday, “Today’s GDP numbers should serve as a stark warning on the need to address our worker shortage, maintain competitive tax rates, bolster U.S. energy independence and pass the China competition bill making its way through Congress.”