FIRST QUARTER GDP KEY POINTS:
- U.S. economic activity contracts1.4% in annualized terms during the first quarter, disappointing expectations
- A negative contribution from net exports and inventories explains the GDP decline
- The S&P 500[1] futures maintains gains
Most read: Energy Stocks Look Attractive on Soaring Oil - Top Trade Opportunities[2]
The U.S. economy hit the brakes and downshifted abruptly during the first three months of the year, marking a sharp turnaround from the robust 6.9% expansion recorded at the end of 2021. According to the Department of Commerce, first-quarter gross domestic product, the broadest measure of goods and services produced in the country, fell 1.4% on an annualized basis, the first contraction since the onset of the COVID-19 pandemic in 2020. Economists surveyed by Bloomberg News had forecast a 1.1% increase in output during this period.
In the grand scheme of things, the economic setback can be attributed to the familiar headwinds that have plagued the economy recently, such as the Omicron wave earlier this year, the Russian invasion of Ukraine, high inflation, and persistent supply chain bottlenecks.
Looking at the component breakdown, the negative headline GDP reading largely reflected weakness in trade and investment. For instance, the external sector subtracted 3.2% from output after imports surged 17.7% as firms front-loaded orders in anticipation of potential shortages following the outbreak of war in Eastern Europe. Exports, for its part, tank 5.9% amid strong U.S. dollar[3] and dwindling demand from abroad. Meanwhile, gross private domestic investment was subdued, up only 2.3%, constrained by private inventories, which knocked off 0.84 percentage point from GDP - a largely anticipated development after businesses had already materially restocked their shelves at the tail end of 2021 to get ahead of supply chain and logistical issues before
