Revised data released by the Commerce Department on Wednesday showed U.S. economic activity shrank by slightly more than previously estimated in the first quarter of 2022.
The report showed the decrease in real gross domestic product in the first quarter was revised to 1.6 percent from the previously reported 1.5 percent. Economists had expected the drop in GDP to be unrevised.
The slightly bigger than previously estimated decline in GDP in the first quarter came on the heels of the 6.9 percent spike in GDP in the fourth quarter of 2021.
GDP fell by more than previously estimated as the increase in consumer spending during the quarter was downwardly revised to 1.8 percent from 3.1 percent.
Lydia Boussour, Lead U.S. Economist at Oxford Economics, said the notably slower than previously estimated consumer spending growth “indicates the economy carried less momentum than previously thought heading into Q2.”
The Commerce Department noted the significant downward revision to consumer spending growth was partly offset by an upward revision to private inventory investment.
The pullback in GDP in the first quarter reflected decreases in exports, private inventory investment and government spending along with an increase in imports, which are a subtraction in the calculation of GDP, increased.
Meanwhile, increases in non-residential fixed investment, consumer spending and residential fixed investment helped limit the downside.
The report also showed the annual rate of growth in core consumer prices, which exclude food and energy, was unrevised at 5.2 percent.
The consumer price growth in the first quarter still represents an acceleration from the 4.6 percent jump seen in the fourth quarter, with prices surging at the fastest rate since 1983.
“While we remain in the camp that recession is not inevitable, aggressive and front-loaded rate hikes have pushed the odds of a hard landing significantly higher, especially for 2023,” said Boussour.
She added, “We now see the economy slowing sharply from 2.3% in 2022 to 1.3% in 2023 with growth falling below stall speed growth in mid-2023.”
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