In 2022, GDP growth in the first quarter of the United States was much lower than market expectations, recording the first negative value since the third quarter of 2020. In terms of itemized contribution, net exports, private inventories and government spending are a drag on growth. At present, the US economy is still far from recession, but in the future, the growth rate of the US economy may slow down compared with the same period last year, and it may face the risk of falling into recession next year. The negative GDP growth rate in the United States in the first quarter is difficult to change the Fed's pace of tightening, and the Fed is expected to continue to significantly tighten monetary policy in the short term.

20:30 on April 28th, Beijing time, the Bureau of Economic Analysis of the US Department of Commerce released the initial growth rate of US GDP in the first quarter of 2022, with an actual GDP growth rate of-1.4% month-on-month.

In 2022, GDP growth in the first quarter of the United States was much lower than market expectations, recording the first negative value since the third quarter of 2020.

The real GDP in the United States in the first quarter was-1.4% month-on-month, below market expectations of 1% and down sharply from the previous value of 6.9%. In terms of breakdown, the annual rate of personal consumption expenditure in the first quarter was 2.7%, which was 2.5% higher than the previous value; the annualized rate of domestic private investment was only 2.3%, which was significantly lower than that of 36.7% in the fourth quarter of last year; and the international trade deficit worsened further. The annualized rate of exports was-5.9%, much lower than the 22.4% in the fourth quarter of last year. Government spending fell further at an annualised rate of-2.7% compared with the previous quarter, down from-2.6% in the fourth quarter of last year.

Although the actual GDP reading in the United States in the first quarter is weak, it is still a long way from recession.

Although the real GDP growth reading of the United States in the first quarter is negative, which is lower than market expectations, and much lower than the previous value, from the contribution of the itemized data, the current US economy is still far from recession. Us first-quarter GDP growth was mainly dragged down by net exports (- 3.2 per cent), private inventories (- 0.84 per cent) and government spending (- 0.48 per cent). In terms of consumption, the main driver of US economic growth, US personal consumption expenditure contributed 1.83% of the month-on-month growth rate in the first quarter, up steadily from 1.76% of Q4 in 2021. At the same time, fixed asset investment contributed 1.27% month-on-month growth in the first quarter, up from 0.5% of Q4 in 2021. Judging from the year-on-year data, the real GDP growth rate in the United States in the first quarter was 3.57% year-on-year, still at a steady growth level.

The strong US dollar, weak external demand, slowing replenishment and reduced welfare spending are the main reasons for the lower-than-expected growth of US GDP in the first quarter. In the future, the US economy may show a slowing trend compared with the same period last year, and may face the risk of falling into recession next year.

First, in terms of net exports, which are the main drag on growth, exports have slowed slightly while imports have risen sharply, which may be due to the sharp strengthening of the dollar index in the first quarter of 2022 and the slowdown in global economic growth. Second, significant replenishment in the fourth quarter of 2021 also slowed in the first quarter of 2022, leading to a sharp decline in private inventory investment. Thirdly, the lack of government expenditure is mainly due to the interruption of the operation of some institutions and the expiration of some social welfare programs caused by the mutation of Omicron. In terms of the follow-up trend, personal consumption, which is still growing steadily, may gradually decline under the influence of high inflation, and the Fed's entry into the tightening cycle will also dampen domestic demand in the United States. Therefore, in the future, the growth rate of the US economy may gradually slow compared with the same period last year and face the risk of falling into recession next year.

The negative GDP growth rate in the United States in the first quarter is difficult to change the pace of Fed tightening, and it is expected that monetary policy will continue to tighten substantially in the short term.

Although the US economy recorded negative growth in the first quarter, the pace of Fed tightening is difficult to change for two reasons. First of all, the Fed's "dual mission" is to stabilize prices and maximize employment, while possibly taking into account financial stability, but the growth rate of GDP is not the direct goal of the Fed's monetary policy. At present, the US job market is still tight and is still in the process of steady repair, so the Fed's goal now is to reduce inflation. Second, an important reason for the current declining support for the Biden administration is high inflation in the United States, so in order to win the victory of the Democratic Party in the mid-term elections, the Biden administration will continue to give the Federal Reserve political pressure to fight inflation. Combined with Powell's speech at the IMF spring meeting last week, we maintain our previous judgment that the contraction may be announced in May, while a rate increase of 50bps in May is still a high probability and the probability of a rate increase of 50bps in June is relatively high.