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The US economy shrank at a 1.5% annualized rate in the first three months of the year, according to new data released yesterday. The figure is a write-down from a previous estimate of 1.4% and is the first quarterly decline in the gross domestic product (see 101) since the onset of the pandemic in the first half of 2020. 

The drop was caused in part by downward revisions to private inventory investments, as warehouses and stores were slower to stock their goods, and residential investments, which include constructing and remodeling homes. A wider trade deficit was also a factor, as the US spent more on imports than it made from exports. Consumer spending grew at a 3.1% annualized rate, helping to offset the decline. 

Analysts expect the US economy to rebound in the second quarter, though there are uncertainties in the outlook, including the effects of the Federal Reserve’s expected interest rate hikes to curb inflation. The nonpartisan Congressional Budget Office estimates the economy will grow 3.1% in 2022.