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The U.S. economy contracted 1.5 percent in this year’s first quarter, according to the most recent estimate by the federal Bureau of Economic Analysis (BEA).
Earlier, the bureau had pegged the loss at 1.4 percent. Dow Jones had estimated a 1.3-percent shrinkage.
It was the U.S. economy’s worst quarterly performance since 2020’s second quarter when the GDP plunged 31.2 percent at the onset of the COVID War.
The negative result was due to 40-year record inflation aggravated by supply chain tangles, the Ukraine war, and a global surge in the COVID virus’s Omicron variant, analysts told CNBC.
Many economists expect those factors will ease in the current quarter.
The Federal Reserve Bank of Atlanta forecasts a 1.8-percent expansion this quarter; CNBC’s poll of economists set a median expectation of 3.3 percent, due in part to “resilient” consumer spending amid rampant inflation and a lingering shortage of goods. (See related story in this issue.)
During the quarter, consumers increased spending by 3.1 percent, the BEA estimates.
TRENDPOST: Consumers may have spent 3.1 percent more but, with inflation running above 8 percent, that increase is also due to shoppers paying more money to buy the same things.
Because the increase in dollars spent was less than the rate at which prices increased, the conclusion is that consumers spent more money but actually bought a smaller volume of stuff.
This is an additional signal that consumer spending is slowing. Because shoppers are the engine of the U.S. economy, any slowdown in consumption will send stiff ripples across the economy generally.