With a quarter of negative economic growth in the books, the data adds to fears that a recession may be on the way.
Real gross domestic product fell at an annual rate of 1.6% from January to March, according to BEA’s third and final revisions for the quarter.
Previously, the ex-ante estimate from April showed a decrease of 1.4%. Last month, it was revised to a decline of 1.5%.
The GDP result in the first quarter, which BEA noted, includes some non-quantified effects from the pandemic and the increase in the Omicron variant, contrasted with the fourth quarter of 2021, when the economy grew at a rate of 6.9% from the previous quarter.
However, the first quarter of 2022 marked the start of Russia’s invasion of Ukraine, which sent economic shock waves through the entire global supply chain, as well as the food, finance and energy markets.
Domestic inflation in the United States has risen to levels not seen in decades, amid ongoing supply chain challenges, rising commodity and labor costs and rising oil prices.
BEA attributed the recent decline of 0.1 percentage points to a slower-than-expected growth in consumer consumption, although this was partially offset by gains in investment in private inventories.
The shift in consumer spending estimates puts further emphasis on the latest price index data for personal spending, one of the Federal Reserve’s favorite measures of inflation, said Shannon Seery, a Wells Fargo economist. The latest report will be released on Thursday.
Wells Fargo expects a mild recession to occur in the second quarter of 2023, though strong household finances and solid consumer and business balances should hold such a downturn if it occurs, rather tame, Seery said.
While a recession is commonly defined as two consecutive quarters of declining GDP, it is not a hard and fast rule, especially for the people who make the official decision. The National Bureau of Economic Research, the judge for U.S. recessions, considers a number of indicators in addition to GDP performance and defines a recession as a “significant decline in economic activity that is spread across the economy and lasts more than a few months.”
The preliminary estimate for the second quarter’s GDP results is scheduled to be published on 28 July.