The US economy contracted in the first quarter, raising fears of a recession.
Summary
The US economy unexpectedly contracted 1.4 percent in the first quarter, raising fears of a recession.
- The contraction surprised economists who expected the economy to grow by 1 percent this quarter. Surging inflation – the GDP price index rose 8 percent in Q1 after jumping 7.1 percent in Q4 – the war in Ukraine and an 8.5 percent cut in defense spending all contributed to the contraction.
- Other contributing factors to the decline in GDP were the widening trade deficit and businesses’ slow rate of inventory investment.
- The economy’s 1.4 percent contraction was a sharp contrast to the 6.9 percent growth figure from the last quarter of 2021 and 5.7 percent growth over 2021 overall.
- The quarterly gross domestic product report had some small notes of good news: weekly unemployment claims fell slightly by 5,000 to 180,000, and consumer spending remained strong.
- The New York Times argued the underlying measures of the economy were solid even while the GDP contracted. Consumer spending grew 0.7 percent, which Wells Fargo’s chief economist called “the aircraft carrier in the middle of the ocean – it just keeps plowing ahead.”
- CNN published an explainer on the technical definition of a recession and “when to be worried.”
- The Washington Post quoted the chief economist at Grant Thornton, who said, “we’ve got a resilient economy, but signs of weakness are starting to show. The reality is that rate hikes and higher prices have consequences.”
- Fox News noted the first quarter of 2022 was the worst quarter in two years, since the pandemic’s early days. Economists expected the economy would grow by 1.1 percent instead of contract by 1.4 percent.
- The Washington Examiner reported the Federal Reserve will hike their interest rate target by a half percentage point – “its most aggressive action in decades” – to rein in inflation when it meets next week.
- National Review argued Biden’s rumored plan to forgive student loan debt en masse would “double down on progressive failure” and make already high inflation worse.
On Your Radar
New York Times – Fears are mounting that Ukraine war will spill across borders.
Fox News – Kenosha meeting discussing memorial for man shot by Kyle Rittenhouse get heated.
Politico – Its Trump vs. Cruz in Ohio and Pennsylvania Senate races.
Breitbart – Department of Homeland Security sets up ‘disinformation governance board’ to fight ‘misinformation.’
Reuters – US says Russia plans fake independence votes in seized Ukraine territory.
New York Post – New York court strikes down Democrats’ gerrymander of New York House districts.
Slate – What were Black Lives Matter leaders doing with a $6 million house?
National Review – Biden must reap the whirlwind if he ‘cancels’ student-loan debt.
Washington Post – How House Minority Leader Kevin McCarthy sought to contain the damage from leaked January 6 audo.
Commentary – Twitter is not the ‘town square.’
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© Dominic Moore, 2022
