U.S. gross domestic product shrank at a 1.4% annual rate in the first quarter as supply disruptions weighed on the economy, though solid consumer and business spending suggest growth will resume.
The decline in U.S. gross domestic product marked a sharp reversal from a 6.9% annual growth rate in the fourth quarter, the Commerce Department said Thursday. The drop also marked the weakest quarter since spring 2020, when the Covid-19 pandemic and related shutdowns drove the U.S. economy into a deep—albeit short—recession.
The drop in GDP stemmed from a widening trade deficit, with the U.S. importing far more than it exports. A slower pace of inventory investment by businesses in the first quarter—compared with a rapid buildup of inventories at the end of last year—also pushed growth lower. In addition, fading government stimulus spending related to the pandemic weighed on GDP.
Despite the slip, many economists think that overall the economy remains on track to resume modest growth in the second quarter and beyond, in part because consumers and businesses are continuing to spend. Consumer spending, the economy’s main driver, rose at a 2.7% annual rate in the first quarter, a slight acceleration from the end of last year.