Another Slowdown
The general sentiment towards the economy has been super negative in the past month or two, and for good reason. After all, nothing has gone well except for people getting more jobs, but that’s irrelevant when things are becoming unaffordable. When it comes to statistics, the labor market has shown positive growth, but inflation has skyrocketed, and crude oil prices are reaching elevated levels. One indicator that rules all when it comes to judging the whole economy, however, is the GDP, which we get every quarter.
In the first quarter of 2022, US GDP contracted at a 1.4% annual rate, the first negative quarter since the start of the pandemic. Key factors included a growing trade deficit, which is where our supply chain bottlenecks can become a big problem as the US was forced to import a lot to keep up with demand. Along with this, a big fuel of growth in the last few quarters was the government stimulus provided by both President Trump and Biden, which has now faded as it’s been a year. This all paints a dark picture, but there are positives that come with this report. Consumer spending, which is arguably the most important, accelerated from the fourth quarter with a rise by 2.7% annually, showing a major improvement. Although a contraction in GDP was expected, economists believe that growth will continue in future quarters regardless of higher interest rates specifically because of strong consumer and business spending, with sectors like leisure making a nice recovery. Interest rates might cause a buffer in the stock market, but the recovery is scheduled to continue.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
