InvestorQ : Is it true that US growth has contracted more than expected?
Ria Jain made post

Is it true that US growth has contracted more than expected?

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Dia Deshpande answered.
2 months ago
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That is absolutely correct. The US has just released the third estimate of GDP growth for the March 2022 quarter and the US GDP has contracted by -1.6%. This is about 10 bps worse than the second estimate. The rate hikes and supply chain disruptions are playing an important role and that is evident from the fact that the GDP growth was an extremely robust and strong 6.9% in the December 2021 quarter.

The fall in GDP is also reflected via other indicators like for example in the slower pace of inventory accumulation by businesses. The key reasons are the higher rates, the hawkishness of the Fed, supply-chain dislocations caused by the war and the China lockdowns as well as worker shortages. The Fed has already increased the rates by 150 bps till date in 3 rounds. However, the dire predictions of a likely recession appear to be coming true. June quarter could be key and could also summarize policy going ahead.

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