US GDP shrinks 1.4% in the first quarter

The US economy is beginning to show the first signs of exhaustion due to the impact of the last blows of the pandemic and high inflation that shot up to 8.5% in March. Against all odds and far from initial estimates, the country's GDP contracted by 1.4% in the first quarter of the year, compared to the same period in 2021.

This data, the annualized, is the main reference of the Office of Economic Analysis of the Government (BEA, for its acronym in English) to evaluate the evolution of employment. But if it is compared with the previous quarter, the figures also invite to activate all the alarms.

Specifically, the American GDP fell by 0.4% compared to the fourth quarter of 2021. A decrease that was also completely unexpected by analysts, who anticipated not only a smaller economic contraction, but a rise of 1.1%. The bump in annualized terms has been brutal. And the statistical office attributes it to the impact of the last blows of the pandemic, with the worsening of the supply crisis and the rise in inflation, together with the blow that the war in Ukraine has also caused and the withdrawal of some supports put in running during the pandemic.

"The market is already discounting a high probability of a recession," say analysts at the Federated Hermes fund manager. Yesa situation complicate, and much, the plans of the Federal Reserve (Fed) to fight against inflation. Or, at least, his strategy to convince the market that raising interest rates by 50 basis points at his meeting next week is the way to go.

The monetary organization will rely on the good performance of the labor market to maintain that it is necessary to step on the accelerator in the withdrawal of stimuli. But many market players see such a pullback as too premature and putting the recovery at risk.