U.S. ECONOMY

Analysts expect to see growth in current quarter.

WASHINGTON — The U.S. economy shrank in the first three months of the year even though consumers and businesses kept spending at a solid pace, the govern- ment reported Thursday in a slight downgrade of its previous estimate for the January-march quarter.

Last quarter’s drop in the U.S. gross domestic prod- uct — the broadest gauge of economic output — does not likely signal the start of a recession. The contraction was caused, in part, by a wider trade gap: The nation spent more on imports than other countries did on U.S. exports. The trade g ap slashed first-quarter GDP by 3.2 percentage points.

Also, a slower restocking of goods in stores and ware- houses, which had built up their inventories in the previous quarter for the holiday shopping season, knocked nearly 1.1 percentage points off the January-march GDP.

Analysts say the economy has likely resumed growing in the current April-june quarter.

The Commerce Department estimated that the economy contracted at a 1.5% annual pace from January through March, a slight downward revision from its first estimate of 1.4%, which it issued last month. It was the first drop in GDP since the second quarter of 2020 — in the depths of the COVID-19 recession — and followed a robust 6.9% expansion in the final three months of 2021.

The nation remains stuck in the painful grip of high inflation, which has caused particularly severe hardships for lower-income households. Although many U.S. workers have been receiving sizable pay raises, their wages in most cases haven’t kept pace with inflation.

In April, consumer prices jumped 8.3% from a year earlier, just below the fastest such rise in four decades, set one month earlier.

High inflation is also posing a political threat to President Joe Biden and Democrats in Congress as midterm elections draw near. A poll this month by The Associated PRESS-NORC Center for Public Research found that Biden’s approval rating has reached the lowest point of his presidency — 39% of adults approve of his performance — with inflation a frequently cited contributing factor.

Still, the economy as a whole remains healthy, though likely weakening. Consumer spending is still solid, growing at a 3.1% annual pace from January through March. Business investment in equipment, software and other items that are intended to improve productivity rose at a healthy 6.8% annual rate last quarter.

And a strong job market is giving people the money and confidence to spend. Employers have added more than 400,000 jobs for 12 consecutive months, and the unemployment rate is near a half-century low. Businesses are advertising so many jobs that there are now roughly two openings, on average, for every unemployed American.