An annualized 1.4% fall in U.S. GDP in the first quarter sounds pretty grim. But the U.S. economy may be taking one step backwards to take two forward.
Semi-trucks line up near Pier J to retrieve shipping containers from China-based ship at the Port of Long Beach, in Long Beach, California, U.S., April 4, 2018. REUTERS/Bob Riha Jr.in the first quarter sounds pretty grim. But the U.S. economy may be taking one step backwards to take two forward.
The pandemic has caused wild swings in the economy. GDP contracted 31% in the second quarter of 2020 only to then expand by nearly 34% the next three months. The first quarter of 2022 was also mired by economic abnormalities. Supply chain disruptionsand Russia’s invasion of Ukraine spurred businesses to stock up on supplies, and that caused the goods trade deficit to jump nearly 18% to a record high $125.3 billion in March, according to the Commerce Department.
That dents GDP, but inventories also rose as a result, so companies are whipping up their warehouses so they can sell more goods in coming months, assuming the supply chain issues don’t clear up. Meanwhile consumer spending increased 2.7% while business investment grew at a robust 9.2%. All of that suggests the decline reported Thursday wasn’t so bad.
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