The U.S. economy under President Joe Biden has shrunk for the first time since the beginning of the pandemic despite inflation continuing to surge and prices remaining elevated.
U.S. real gross domestic product (GDP) decreased at an annual rate of 1.4% in the first quarter of 2022, according to Thursday data from the Bureau of Economic Analysis (BEA), marking the first time the economy has shrunk since the second quarter of 2020, the height of the COVID-19 pandemic. (RELATED: ‘When Will This End?’: Sen. Manchin Goes After Biden Admin Over Inflation)
Meanwhile, prices remain sky-high and inflation continues to surge; the Consumer Price Index (CPI), a key inflation indicator, soared 8.5% over the last year, the highest increase on record since 1981. Producer prices have also soared, achieving the highest year-over-year gain on record, according to CNBC.
WHOA—GDP turns negative to start 2022. This is what they call stagflation. Inflation and supply chain biting big time.
— Brian Brenberg (@BrianBrenberg) April 28, 2022
Despite the negative GDP growth amid surging inflation, an indicator of “stagflation,” current-dollar personal income increased $268.0 billion in the first quarter of 2022. However, personal savings decreased from the previous quarter, down to $1.21 trillion compared with $1.39 trillion in the fourth quarter of 2021.
The BEA partially attributed the negative GDP figures to disruptions caused by the resurgence of COVID-19.
“In the first quarter, an increase in COVID-19 cases related to the Omicron variant resulted in continued restrictions and disruptions in the operations of establishments in some parts of the country,” the BEA said when announcing its report. “Government assistance payments in the form of forgivable loans to businesses, grants to state and local governments, and social benefits to households all decreased as provisions of several federal programs expired or tapered off.”
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