U.S. economy unexpectedly contracts in first quarter

“The American economy contracted an annualized 1.4% on quarter in the first three months of 2022, well below market forecasts of a 1.1% expansion and following a 6.9% growth in Q4 2021 mostly due to a record trade deficit and a decline in inventory investment. Together, net exports and inventories subtracted about 4 percentage points from growth. The decrease in real GDP reflected decreases in private inventory investment, exports, federal government spending, and state and local government spending, while imports, which are a subtraction in the calculation of GDP, increased. Personal consumption expenditures (PCE), nonresidential fixed investment, and residential fixed investment increased.”

United States GDP growth rate

Source: tradingeconomics.com 

USAGOLD note: Some economists, recalling the late 1920s monetary episode, will question raising rates in the teeth of what looks to be an economic slowdown. The surprise GDP contraction lays the groundwork for an interesting Fed policy meeting next week. At the moment, it appears that the markets believe the Fed will stick to its guns on a tightening cycle.