First quarter GDP (final) shrinks 1.6%

Real GDP decreased at a seasonally adjusted annual rate of 1.6% during the first quarter of 2022, according to the Bureau of Economic Analysis’s “third” estimate. Real GDP increased 6.9% in the fourth quarter of 2021.

The decrease in real GDP reflected decreases in federal government spending, private inventory investment, and state and local government spending, while imports, which are a subtraction in the calculation of GDP, increased.

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. 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. The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the first quarter because the impacts are generally embedded in source data and cannot be separately identified.

Consumption added 1.24 percentage points (pp) to growth; this follows a 1.76 pp addition during the fourth quarter of 2021. The increase in PCE was driven by services (led by housing and utilities) and durable goods (led by motor vehicles and parts), offset by a decrease in nondurable goods (led by both gasoline and other energy goods and food and beverages purchased for off-premises consumption). Inventories fell, subtracting 0.35 pp from GDP. Residential investment added a total of 0.02 pp to GDP.

Business investment added 1.26 pp to GDP growth. Investment in intellectual property added 0.56 pp to GDP, while investment in transportation equipment subtracted 0.07 pp.

Government spending decreased, subtracting 0.51 pp from GDP. Federal and state-local government subtracted 0.46 and 0.05 pp from GDP, respectively.

Read the BEA release.