The U.S. economy contracted 1.4% in the quarter that ended January. This is the first decline since the outbreak of the pandemic. However, the main reason for the decline was a record-breaking trade deficit. The economy was growing steadily despite robust consumer spending and strong investment by businesses.
The economy’s scorecard, gross domestic product, was significantly lower in the first three months, government figures indicate. The GDP grew 6.9% by the end of 2021.
The U.S. trade deficit is the main reason for most of this weakness. For example, the gap in goods averaged $113 million in its first quarter, compared to $87 billion one year earlier.
The trade deficit itself reduced GDP by an astounding 3.2 percentage points, which is the second-highest number ever recorded.
The frail GDP result was also due to lower government spending and declining inventory stockpiles.
Economists also prefer the final sales to domestic buyers as a measure of U.S. growth. They rose by 2.6% in quarter one.
Both consumer spending and business investment were strong pillars of the economy. After adjusting for inflation, household outlays increased 2.7%. This suggests that the U.S. recovery after the pandemic is more possible.
There are more tripwires to come. To try and stop the worst inflation outbreak in 40 years, the Federal Reserve will quickly raise interest rates. Global economic damage could also be caused by the war in Ukraine and major Chinese lockdowns.
It should be an interesting day. Here are some of the key market movers today:
Meta shares rise as Facebook sees user growth –. Facebook’s main social network saw more users than expected in the first quarter. This could help to thwart concerns that the company may be losing momentum as a new generation flocks toward younger sites like TikTok.
Democrats attempt to save Biden’s economic agenda. The party is trying to salvage the support of Senator Joe Manchin (D-WV) by combining tax, energy, and prescription-drug elements with midterms approaching.
EU advises countries not to pay rubles for Russian gas. According to Kadri Simson, chief of energy policy, the European Commission advised European Union countries to use euro or dollar currencies for their gas contracts with Russia. They should not pay in rubles.
Biden approves additional gas export projects. Exxon Mobil Corp. and Qatar Petroleum are building a liquefied natural gas project called Golden Pass LNG. Glenfarne Group LLC’s Magnolia LNG Project for Louisiana was approved by the Energy Department to ship gas to other countries that do not have a free trade deal with the U.S.
Qualcomm predicts positive revenue growth as diversification pays off. After beating analyst estimates for second-quarter revenue and profit, Qualcomm Inc expects third-quarter revenue to surpass analysts’ expectations. This is largely due to the company’s decision to concentrate on its growing non-handset business in order to offset the likely impact of slowing smartphone demand.