GDP in the first quarter fell 1.5%, worse than expected; unemployed injuries edge lower
A ‘We hire!’ The sign is located at a Starbucks in Los Angeles, California.
Mario Tama | Getty pictures
The US economic downturn to start the year was worse than expected as weak business and private investment failed to offset strong consumer spending, the Department of Commerce reported Thursday.
GDP for the first quarter fell at a 1[ads1].5% annual rate, according to the second estimate from the Bureau of Economic Analysis. It was worse than the Dow Jones estimate of 1.3% and a write-down from the originally reported 1.4%.
Downward revisions for both private furniture and housing investments offset a change upwards in consumption expenditure. An increasing trade deficit also deducted from total GDP.
The decline in GDP represented the worst quarter since the pandemic of Q2 of 2020, in which the United States fell into a recession spurred by a government-imposed economic shutdown to combat Covid-19. GDP fell 31.2 per cent in that quarter.
Economists largely expect the US to pick up again in the second quarter as some of the factors holding back growth early in the year decline. An increase in the omicron variant slowed activity, and the Russian attack on Ukraine exacerbated supply chain problems that had contributed to high inflation for 40 years.
CNBC’s Rapid Update survey shows a median expectation of 3.3% growth in the second quarter; The Atlanta Fed’s GDPNow tracker also points to a rebound, but at a more subdued 1.8% pace.
One factor that contributes to growth is a resilient consumer who is fighting through inflation than accelerated 8.3% from a year ago in April.
Consumption expenditure measured by personal consumption expenditure increased 3.1%, better than the first estimate of 2.7%. This has come as the labor market has continued to be strong and wages are rising rapidly, but still below the inflation rate.
The first unemployment claims for the week ending 21 May were 210,000, a decrease from the previous 218,000, the Ministry of Labor reported.
Continued claims, after staying around the lowest level since 1969, increased for the week ending May 14 to nearly 1.35 million.
Correction: An earlier version entered an incorrect number for weekly unemployment claims.
