The end of the 6th consecutive quarter of growth
Growing fears of inflation amid economic downturn
The U.S. Department of Commerce announced on the 28th that in the first quarter (January to March), the growth rate of gross domestic product (GDP) recorded an annual rate of -1.4%. It was lower than the Wall Street estimate (1.1%) compiled by Reuters and fell significantly compared to the fourth quarter of last year (6.9%). It is the first time the US economy recorded negative growth since the second quarter of 2020, when the novel coronavirus infection (COVID-19) was in its infancy.
The unexpected ‘reverse economic run’ by the US includes the rise in international energy prices following Russia’s invasion of Ukraine, consumer prices at a 41-year high, concerns that the US central bank’s Federal Reserve (Fed) will aggressively raise interest rates, and Corona 19 It is interpreted as the result of overlapping omicron mutation pandemic. As a result, concerns about ‘stagflation’, which continue to rise in the midst of an economic downturn, are rising.
The US economy grew 5.1% in the first quarter of 2020, when the first outbreak of COVID-19, and recorded an all-time low growth of -31.2% in the second quarter of the same year. Since then, it has succeeded in rebounding due to aggressive stimulus measures and interest rate cuts, continuing positive growth for six consecutive quarters from the third quarter of 2020 to the fourth quarter of last year.
The outlook for the US economy is mixed. Positives don’t see the prospects as bad as the job market is stabilizing, with US business and consumer spending still rising and the unemployment rate at 3.8% in March despite the growth shock today. In the first quarter, personal consumption and domestic investment increased by 5.4% and 12.5%, respectively.
Pessimists estimate that the Fed, which raised the benchmark interest rate by 0.25 percentage points in March, is expected to raise rates by 0.50 percentage points next month and continue to raise interest rates to keep up with soaring inflation. The World Bank recently warned that “the world is facing 1970s-style stagflation”. Deutsche Bank also issued a report saying that “a large-scale recession could occur in the United States due to the threat of inflation, etc.”
Reporter Lee Chae-wan chaewani@donga.com
