Gross domestic product unexpectedly declined at a 1.4% annualized pace in the first quarter, marking an abrupt reversal for an economy coming off its best performance since 1984, the Commerce Department reported Thursday.
The negative growth rate missed even the subdued Dow Jones estimate of a 1% gain for the quarter, but the initial estimate for Q1 was the worst since the pandemic-induced recession in 2020. GDP measures the output of goods and services in the U.S. for the three-month period.
Despite the disappointing number, markets paid little attention to the report, with stocks and bond yields both mostly higher. Some of the GDP decline came from factors likely to reverse later in the year, raising hopes that the U.S. can avoid a recession.
"In retrospect, this could be seen as a pivotal report," said Simona Mocuta, chief economist at State Street Global Advisors. "It reminds us of the reality that growth has been great, but things are changing and they won't be that great going forward."
A plethora of factors conspired to weigh against growth during the first three months of 2022, which fell off a cliff following the 6.9% gain to close out last year.
Rising Covid omicron infections to start the year hampered activity across the board, while inflation surging at a level not seen since the early 1980s and the Russian invasion of Ukraine also contributed to the economic stasis.
Prices increased sharply during the quarter, with the GDP price index deflator rising 8%, following a 7.1% jump in Q4.