US economy shrinks in first quarter of 2021

The U.S. economy shrank in the first three months of the year, although consumers and businesses kept spending at a solid pace, the government reported Thursday in a slight downgrade from its previous estimate for the January-March quarter.

The US gross domestic product, the broadest gauge of economic output, did not signal the beginning of a recession last quarter. The nation spent more on imports than other countries on US exports in part because of the wider trade gap.

The weakness was due to a slower restocking of goods in stores and warehouses, which had built up their inventories in the previous quarter for the 2021 holiday shopping season.

Analysts say the economy has resumed growing in the current April-June quarter.

The Commerce Department estimates that the economy contracted at a 1.5% annual pace from January through March, a slight downward revision from its first estimate of 1.4%, which was issued last month. It was the first drop in GDP since the second quarter of 2020 - in the depths of the COVID-19 recession and followed a robust 6.9% expansion in the final three months of 2021, which was the first drop in GDP since the second quarter of 2020.

The nation remains in the grip of high inflation, which has resulted in severe hardship for poor-income households, many of whom are people of color. Many of the US workers have been given sizable pay raises, but their wages haven't kept pace with inflation. In April, consumer prices increased by 8.3% from a year ago, just less than the fastest rise in four decades, set one month earlier in the year.

As midterm elections draw near, high inflation is a political threat to President Joe Biden and Democrats in Congress. A poll released this month by The Associated Press-NORC Center for Public Research found that Biden's approval rating has risen to the lowest point of his presidency - just 39% of adults approve of his performance - with inflation a major factor in his approval rating.