The U.S. economy shrank last quarter for the first time since the pandemic recession struck two years ago, contracting at a 1.4% annual rate, yet consumers and businesses kept spending in a sign of underlying resilience.

The steady spending suggested that the economy will likely keep expanding this year even though the Federal Reserve plans to raise rates aggressively to fight the inflation surge. The first quarter’s growth was hampered by a slower restocking of goods in stores and warehouses and by a sharp drop in exports.

The 2022 first quarter ended a run of six straight quarters where the U.S. economy grew.

The Bureau of Economic Analysis noted that COVID-19 likely had some impact on the figures. The agency said a rise in cases due to the omicron variant
coupled with the end of several pandemic programs, like the expansion of the child tax credit, played a role in the figures.

There continued to be a jump in personal income, but some of that was offset by the ending of government assistance plus rising costs.