US economy contracted ‘severely’ in the first quarter of 2022, signs of a recession? – DailyBitcoin

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US economy contracted 'severely' in the first quarter of 2022, signs of a recession? - DailyBitcoin For Hannah Perez

GDP fell for the first time since the start of the pandemic in 2020, showing signs of a slowdown in economic growth. But what does it mean for cryptocurrencies?

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The US economy slowed markedly during the first three months of 2022. The data, provided by the US government, shows signs of economic contraction for the first time in two years.

The gross domestic product (GDP) of the North American nation, the broadest measure of economic activity, decreased by 0.4% between January and March, the equivalent of an annual drop of 1.4%said the Bureau of Economic Analysis in a report released Thursday.

The metrics show that the country’s economy has contracted severely, taking into account that for the first quarter of 2021 it had registered a growth of 1.7%, or 6.9% on an annualized basis. The slowdown comes amid a tense geopolitical landscape, with the war between Russia and Ukraine causing oil prices to spike.

US economic contraction

The government agency said the slowdown was caused by a rise in imports and a drop in private inventory investment, exports, federal government spending and state and local government spending, according to reports. Guardian. It should be noted that this is the worst performance since the second quarter of 2020, when the pandemic began.

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The news came as a surprise, as the data reportedly fell far short of economists’ estimates, which anticipated a 1% GDP increase for the period. Paul Ashworth, Chief Economist at Capital economy for the United States, He called the fall “unexpectedly severe“, as quoted by that news outlet.

Ashworth also pointed out that the report probably won’t stop the Federal Reserve (FED), the country’s central bank, from continuing to raise interest rates. Recall that the Fed raised rates in March when inflation hit a 40-year high of 7.9%. Fed Chairman Jerome Powell suggested a possible rate hike of 0.5 percentage point a few days ago, double the increase in March.

The administration of US President Joe Biden was optimistic despite the figures, and assured that the national economy is resilient in the face of historical challenges“. In a statement issued on Thursday, and collected by CNNsaid:

“While last quarter’s growth estimate was affected by technical factors, the United States faces the challenges of Covid-19 around the world, Putin’s unprovoked invasion of Ukraine, and global inflation from a position of strength. ”.

Recession? What does it mean for Bitcoin?

The economic contraction data raised concerns about the imminent arrival of an economic recession. After all, as indicated CNBCthe generally accepted definition of economic recession refers to two consecutive quarters of negative decline for the gross domestic product of a country.

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While the release of the report did not seem to have a particular impact on the crypto markets, the scenario of a possible recession could affect the prices of cryptocurrencies. Bitcoin and other cryptocurrencies in the medium term, some analysts warn.

Today’s numbers suggest we are probably closer to a recession than previously thought.Joe Haggenmiller, head of markets at XBTO, a crypto finance firm, told CoinDesk. Therefore, it stands to reason that if negative growth persists, stock markets may suffer and Bitcoin too due to its positive correlation“.

At the time of publication, the price of Bitcoin it remains below $40,000 amid what appears to be a modest downtrend in the broader digital currency market.

Inflation grows in the US and Europe

Despite the figures, not all economists have raised concerns, as while overall GDP was negative, underlying components such as consumption, fixed investment and demand remained strong, as noted by CoinDesk.

Meanwhile, some experts have also pointed out that a recession might not necessarily be a bad thing for cryptocurrencies. the strategist of Bank of America (BoFA)Michael Hartnett, who anticipated earlier this month that the US economy could enter a recession, believes such a scenario could push crypto prices above bonds and stocks.

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The latest GDP data in the US coincided with a recent inflation report. La Office of Economic Analysis indicated this Friday that the basic personal consumption expenditures price index increased 5.2% from the previous yearas reported CNBC. The index, which measures the costs consumers pay for a wide range of items and tracks how behavior changes in response to market dynamics, is the Fed’s favorite measure of inflation.

In Europe the picture is not very different, as inflation in the euro zone is also rising to record highs. In April, inflation in the countries of the European bloc reached 7.5%, according to estimates from the European statistics office published this Friday.


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Article by Hannah Estefanía Pérez / DailyBitcoin

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WARNING: This is an informative article. DiarioBitcoin is a means of communication, it does not promote, endorse or recommend any investment in particular. It is worth noting that investments in crypto assets are not regulated in some countries. May not be suitable for retail investors as the full amount invested could be lost. Check the laws of your country before investing.

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