The first quarter of 2022 showed a drop in GDP of 1.4%, as many have pointed out, this has been the worst that GDP has been since the start of the Covis-19 Pandemic. This is in spite of the 6.9% growth we saw in the fourth quarter of 2021, so what happened?
Well there were a lot of factors. In the previous quarter there was a sharp increase in producing inventory, helping boost GDP, but in the first quarter inventory investment actually slowed down. The article does not directly address why this might be, and then it goes on to list how consumer spending as increased as well as investment in R&D by businesses. However, later in the article it does mention that while consumption is up, consumers are purchasing more services than they are products (Travel and hospitality is specifically mentioned in the article). This implies that the inventory that got stocked up in late 2021, isn't being sold as quickly as firms thought. So naturally they're decreasing the amount that they're producing.
With consumption increasing, arguably the most worrying thing at the moment is inflation. Prices are still increasing and it seems that consumers are still buying regardless of what the price is. There is legitimate concern right now that the higher rate of consumption now will result in consumers having less buying power later in the year as prices don't appear to be coming down anytime soon.
Since inflation is such a serious concern right now, that is probably the reason that the Federal Reserve is still planning on raising interest rates despite the drop in GDP. Unfortunately the thing we know for sure is that the economy is going to be rocky in the near future no matter what the Federal Reserve decides.
https://www.wsj.com/articles/us-economy-gdp-growth-q1-11651108351
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