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The US economy shrank at a 1.4% annualized rate in the first three months of the year, according to figures released yesterday. The downturn marked the weakest period since the onset of the pandemic two years ago, and signaled a sharp reversal from the 6.9% annualized growth seen in the fourth quarter of last year.

Analysts pointed to a number of factors contributing to the drop—January’s omicron COVID-19 wave, high inflation, the war in Ukraine, a decrease in fixed business investment, a widening trade deficit, and more. A drop in defense spending, along with the ramp-down of pandemic-era stimulus seen in 2021, also contributed to the slowdown. Despite the decline, many experts pointed to a 2.7% increase in consumer spending as a reason for optimism.

The effects of expected interest rate hikes by the Federal Reserve in the coming months, an attempt to combat inflation, remain to be seen.