US economy falls 1.4% in Q1 amid a series of challenges

In the first three months of 2022, the US posted its poorest quarterly economic performance since the recession triggered by the COVID- 19 pandemic, as the headwinds from soaring inflation, interest rate hikes by the Federal Reserve and the pullback from Omicron weighing on growth momentum.

US GDP declined at an annualized 1.4 percent in the first quarter, the Commerce Department’s preliminary estimate showed on Thursday, which is a significant slowdown from the 6.9 percent growth recorded in the fourth quarter of last year.

The slowdown reflected a record US international trade deficit, lower government expenditure, and a decline in inventory levels as more enterprises take a wait- and- see approach before stepping up inventory volumes, experts said.

The first quarter result was below economists’ and institutions’ forecasts. Economists polled by Reuters expected growth to slow to an annualized rate of 1.1 percent over the first three months.

Goldman Sachs lowered its estimate to a 1.3 percent rate from a 1.5 percent pace, while JPMorgan slashed its forecast to a 0.7 percent pace from 1.1 percent.

“The US central bank is beefing up efforts to cool domestic inflation as prices rise at their fastest pace in more than four decades, which will directly restrict consumption and investment,” said Tian Yun, former vice director of the Beijing Economic Operation Association.

Given the current impact on economy during the initial phase of rate hikes, it is hard to say whether the Fed could complete its follow- up rate hike moves and balance sheet reduction plan, Tian told the Global Times on Thursday.

Tian forecast that the US economy was headed for a “soft landing,” and the headwinds from rising inflation, interest rate hikes and the pullback from Omicron will continue to weigh on its growth momentum, despite recording an expansion of 5.7 percent for the whole 2021, the strongest in nearly four decades.