US Q1 Growth Rate -1.4%... Biden Says "Technical Factors, No Concern for Recession"

[Image source=AP Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] U.S. President Joe Biden on the 28th (local time) drew a line on concerns about a recession, saying that the U.S. first-quarter Gross Domestic Product (GDP) annualized rate of -1.4% was due to technical factors.

President Biden said in response to reporters' questions at the White House that he does not believe the U.S. economy has entered a recession, stating, "I am not worried about a recession."

Additionally, in a separate statement regarding the first-quarter growth rate, President Biden emphasized that "the U.S. economy continues to show resilience despite historic challenges," highlighting that consumer spending, business investment, and residential investment all increased at a strong pace in the first quarter. He also added that the number of people receiving unemployment benefits is at its lowest level since 1970.

President Biden said, "The growth estimate for the last quarter was affected by technical factors," and assessed that "the U.S. is facing global challenges such as the COVID-19 pandemic, Vladimir Putin’s (Russian President) unjust invasion of Ukraine, and strong global inflation." The resilience of the U.S. economy is solid, and variables such as COVID-19 and the Ukraine situation contributed to the negative growth.

The advance estimate of the first-quarter GDP growth rate released by the U.S. Department of Commerce on the day was recorded at an annualized -1.4%. This is the first time negative growth has been recorded since the early stages of the COVID-19 crisis in the first and second quarters of 2020. It is also significantly below the market forecast of 1.0%. The previous quarter, the fourth quarter of last year, saw 6.9% growth.

Locally, the unexpected negative growth is attributed to a severe trade deficit. CNBC reported that the U.S. trade deficit in the first quarter set a record high, pulling down the overall GDP by 3.2 percentage points. The reduction in government spending due to the decrease in COVID-19 stimulus measures also had a negative impact on the growth rate. Inflation and decreased inventory sales were also mentioned as factors.

In particular, as the Biden administration tried to downplay this GDP negative growth, negative reactions have also emerged.

The Washington Post (WP) pointed out that "while many economists see acceleration in economic expansion, fears of a recession are also growing," and criticized President Biden’s statement as an attempt to lightly dismiss the first-quarter economic contraction.

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