Stagflation! US Economy Unexpectedly Contracts For First Time Since 2020

Well that didn’t go as planned! America’s economy unexpectedly contracted in the first quarter of 2022, marking the first stark reversal in growth since the summer of 2020.

Advanced estimates from the Commerce Department showed that GDP suddenly fell by an annualized 1.4% in the first quarter of 2022, following growth of 6.9% in the fourth quarter of last year. The latest figures were well below the 1% increase forecast by economists polled by Dow Jones, as a number of factors were to blame for the economic stasis.

The slump in output was largely due to a decline in private inventory investment, which subtracted 0.84% from GDP compared to an increase of 5.32% in the previous quarter. Net exports also took a substantial toll on America’s economy, subtracting 0.68% from output versus an increase of 2.24% in the fourth quarter.

With respect to the dirty word stagflation, Commerce Department data showed the GDP deflator jump from 7.1% to 8%, substantially surpassing expectations calling for a modest increase to 7.2% as prices continued to explode higher. Meanwhile, the Fed is now caught between an even heavier rock and a hard place, as Chair Jerome Powell scrambles to maintain the US economy on an upward trajectory path in face of 40-year-high inflation.

Information for this briefing was found via the Commerce Department. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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