GDP crumbled down for the first time since the pandemic’s start in 2020, presenting clear signs of a slowdown in economic increase. But what does it mean for digital assets?
The US economy slowed markedly during the first three months of 2022. The data brought by the US administration, present clear signs of economic decrease for the first time in two years.
The North American nation’s gross domestic product (GDP), the broadest measure of economic activity, contracted at least 0.4% between January and March, the equivalent of an annual drop of 1.4%, highlighted the Office of Economic Analysis in a report launched this Thursday.
The metrics highlighted that the country’s economy decreased severely, considering that for the first quarter of 2021, it had marked a growth of 1.7%, or 6.9%, on an annualized basis. The slowdown comes amid a tense geopolitical panorama, with the current conflict between Russia and Ukraine causing oil prices to reach unprecedented peaks.
US Economic Decreasing
The government agency highlighted that the slowdown got generated by a surge in imports and a drop in private inventory investment, exports, federal government spending, and spending by state and local administrations, according to The Guardian. This situation is the worst performance since the second quarter of 2020 when the outbreak began.
The news arrived as a surprise, as the data reportedly crumbled down far short of economists’ estimates, which anticipated a 1% GDP increase. Paul Ashworth, the maximum representative of the US economy at Capital Economics, named the situation unexpectedly harsh.
Ashworth also highlighted that the report probably wouldn’t stop the Federal Reserve (FED), the country’s central bank, from continuing to raise interest rates. The Fed elevated rates in March when inflation reached a 40-year high of 7.9%. Fed Chairman Jerome Powell talked about a possible rate peak of 0.5 percentage points a few days ago.
The latest GDP data in the US coincided with recent inflation research. The Bureau of Economic Analysis highlighted this Friday that the primary personal consumption expenditure price index increased 5.2% from a year earlier.
The Fed’s favorite measure to track the inflation rate is the index, which follows the costs consumers pay for a vast range of products and tracks how behavior changes in response to market movements.
In Europe, the picture seems to be the same, as inflation in the eurozone is also rising to unexpected high peaks. In April, inflation in the nations of the European bloc reached 7.5%, according to estimates from the European statistics office revealed this Friday.
By: Jenson Nuñez
