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The US Commerce Department announced on Thursday (28) that US GDP (Gross Domestic Product) declined 1.4% in annualized terms in the first quarter of 2022.
The result came far below the consensus of the survey carried out by the data company Refinitiv, which pointed to growth of 1.1% in economic activity in the period.
But, after all, what does this retraction of the largest economy on the planet represent? To answer this question, it is necessary to understand the elements that led to the decline in US GDP.
The first factor to be taken into account is the sharp reduction in aid payments by the government to US citizens due to the cooling of the coronavirus pandemic.
In addition, imports grew by 17.7% in the period compared to the fourth quarter of 2021. In the GDP calculation, the volume of imports has a negative weight, being subtracted from the result.
Therefore, the retraction of US economic activity in the quarter can be attributed to one-off factors, and not to a recession trend in the largest economy on the planet.
What reinforces the positive outlook for the US economy are the signs that demand remains heated in the country, with consumer spending growing at a fast pace since the most critical moment of the pandemic. The job market also remains strong, with the unemployment rate at historically low levels.
Due to these factors, the contraction of GDP in the first quarter should not change the plans of the Federal Reserve (Fed, the US central bank) to accelerate the pace of interest rate hikes in the country, and could raise them beyond the level considered neutral.
For the upcoming meetings of the Federal Open Market Committee (FOMC, the US monetary policy committee), I still see increases of 0.5 percentage point in the basic interest rate as the most likely scenario, since inflation remains at very high levels. high in the United States.
Read on ‘Investigando o Mercado’ (exclusive to UOL Investimentos subscribers): information on the results of mining company Vale in the first quarter of 2022, in addition to the share buyback plan announced by the company.
A hug,
Rafael Bevilacqua
Levante’s Chief Strategist and Founding Partner
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