Gross domestic product, the broadest measure of goods and services produced across the economy, shrank by 1.4% on an annualized basis in the three-month period from January through March, the Commerce Department said in its first reading of the data on Thursday.
The substantial downturn stems from a widening trade deficit, with the U.S. importing far more than it exported: In the three-month period from January to March, imports surged by nearly 20% as businesses and consumers bought more goods from abroad. But exports fell about 6% – an imbalance that widened the trade deficit.
The U.S. also saw a slower pace of inventory investment by businesses in the first quarter, following a surge in inventors at the end of 2021 as companies restocked in anticipation of the holiday-shopping season.
But key pillars of the economy – consumer spending and business investment – remained solid last quarter: Businesses and consumers boosted their spending by 3.6% at the start of the year, compared with 6.1% last year. Another bright spot in the economy is the jobs market. Unemployment fell to 3.6% last month, the lowest level since the pandemic began in February 2020, and jobless claims have continued to fall amid an exceptionally tight labor market.