The U.S. economy contracted in the first three months, despite consumers and businesses spending at a steady pace. This was reported by the government Thursday in a slightly lower estimate than its January-March quarter.
The drop in U.S. Gross Domestic Product, the broadest measure of economic output, last quarter does not indicate a recession. A wider trade gap was partly responsible for the contraction: The United States spent more on imports than it did on U.S. exported goods. The first quarter GDP was slashed by 3.2 percent due to the trade gap.
A slower restocking in warehouses and stores of goods, which had increased their inventories for the 2021 holiday season, dragged down the January-March GDP by nearly 1.1 percentage points.
According to the Commerce Department, the economy contracted by 1.5% annually between January and March. This is a slight decrease from its initial estimate of 1.4% that it released last month. This was the first decline in GDP since 2020's second quarter. It occurred during the COVID-19 recession.
The country is still stuck in high inflation. This has created severe hardships for low-income households, many of which are people of color. Although many U.S. workers have received substantial pay increases, wages have not kept up with inflation in most cases. Consumer prices rose 8.3% in April compared to a year ago, which is just below the record for fastest price rises in four decades.