US economy contracts due to trade imbalance as imports surge and exports fall

Fri 29 Apr 2022
Posted by: Noelle McElhatton
Trade News

The US economy contracted in the first quarter of the year partly due to trade disruption from the Ukraine war.

Commerce Department figures indicated US GDP fell at an annualised rate of 1.4%, a worse than expected figure and the first fall since the coronavirus recession in 2020.

The BBC reports analyst commentary that a surge in imports, as exports fell, made the economy look worse than it was.


Companies rushed to build up inventories at the end of 2021 to avoid any supply chain disruptions during the holiday period and did not have to do much restocking at the start of this year.

US exports fell, hurt in part by lower demand abroad, resulting in a growing trade deficit, which hit a record high in March as import volumes and prices surged, reports the FT.

Exports fell 5.9% and imports rose 17.7%, leading net exports to bring down GDP by 3.2%.

The data come as fears grow that inflation and aggressive tightening by the Federal Reserve will trigger a recession.

Inflationary fears

US has its highest inflation in 40 years as the Russian invasion of Ukraine has driven up commodity prices and Covid lockdowns in China create supply chains disruption.

Other sectors of the US economy remain strong, reports the Guardian. Employers have added an average of 600,000 new jobs a month over the last six months and the unemployment rate fell to 3.6% in March, close to its pre-pandemic low.

Consumer spending has also remained healthy, rising at an annual rate of 2.7% in the quarter, up from the end of last year.