Unemployment among Saudis fell to 10.1% in 1Q

WASHINGTON: The US economy contracted slightly more than previously estimated in the first quarter amid a record trade deficit and supply chain disruptions, government data showed on Wednesday.

The Commerce Department’s third estimate of gross domestic product also showed some under- lying softness in the economy, with consumer spending revised lower and inventories higher than reported last month. This does not bode well for domestic demand and the economic outlook amid recession jitters as the Federal Reserve aggressively tightens monetary policy to tame inflation.

“The biggest effect from this report is that it leaves inventories in a more overbuilt position than previously thought, putting second quarter GDP into negative territory pending what tomorrow’s data reveal about May consumption and consumer inflation and April revisions to the same,” said Chris Low, chief economist at FHN Financial in New York.

Gross domestic product fell at a 1.6 percent annualized rate last quarter, revised down from the 1.5 percent pace of decline reported last month. Economists polled by Reuters had forecast the pace of contraction would be unrevised at a 1.5 percent rate.

The economy was initially estimated to have contracted at a 1.4 percent rate. It grew at a robust 6.9 percent pace in the fourth quarter. GDP was 2.7 percent above its level in the fourth quarter of 2019.

Consumer spending, which accounts for more than two-thirds of the economy, grew at a 1.8 percent rate instead of the 3.1 percent pace reported last month. The downgrade reflected downward revisions to financial services and insurance as well as healthcare.

Spending on long-lasting goods like motor vehicles and recreational goods was revised lower.

Businesses accumulated inventories at a $188.5 billion rate, rather than the $149.6 billion rate reported last month. As a result, growth in final sales to private domestic purchasers, which excludes trade, inventories and government spending, was revised down to a 3 percent rate last quarter. This measure of domestic demand was previously reported to have risen at a 3.9 percent rate.