West News Wire: Despite the fact that the US economy fell in the first three months of the year and is threatened by high inflation and rising interest rates, economists predict that growth will resume in the second half of 2022, based on the strength of the employment market and consumer spending.

Economists think the 1.4 percent quarterly drop in GDP the first since the pandemic began in 2020 is unlikely to signal the start of a recession. That may be of little consolation to President Joe Biden and Democrats, who are facing mid-term elections this year in which Republican opponents will focus on rising prices for food, energy, and other necessities.

According to the Commerce Department’s report released on Thursday, two trends drove the US economy’s drop last quarter.

Imports soared nearly 20% as Americans bought more foreign-made goods, while exports fell almost 6% as growth slowed overseas a widening of the trade deficit that subtracted 3.2 percentage points from GDP.

After furiously restocking their inventories ahead of last year’s holiday shopping season, businesses did so at a slower pace at the start of this year.

As a result, first quarter GDP the nation’s total output of goods and services fell far below the 6.9% annual growth in the fourth quarter of 2021.

The U.S. economy is in an unusual and challenging position.

Economists consider these trends a better gauge of the economy’s core strength than the latest GDP figure.

Still, serious threats have emerged. Supply chain disruptions in China and elsewhere are still a pandemic-era reality, and the war in Ukraine is contributing to higher inflation, which erodes consumers’ spending power. Last month, prices jumped 8.5% from a year earlier, the fastest such rise in four decades.

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“We are at a turning point in the economy,” said Gregory Daco, chief economist at tax advisory firm EY-Parthenon. “The pace of growth is moderating.”

The first quarter’s weak showing also reflected a slowdown from last year’s robust rebound from the pandemic, which was fueled in part by vast government aid and ultra-low interest rates. With stimulus checks and other government supports having ended, consumer spending has slowed from its blistering pace in the first half of last year.

Last quarter’s negative GDP number also undercuts a key political message of President Biden. The president has pointed to rapid growth as a counterpoint to soaring inflation. Compounding Biden’s difficulties, Russia’s invasion of Ukraine and rising COVID cases overseas are weighing on the economy and heightening inflation pressures. Many companies are also still struggling to obtain the parts and supplies they need from tangled supply chains.


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