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Is the US heading for a recession? | The economy is shrinking for the first time in almost 2 years

Experts are divided over whether the country is headed for a recession after the economy slumped for the first time since the pandemic began.

NORFOLK, Va. — The nation’s economy endured its worst quarter since the onset of the COVID-19 pandemic, according to a report by the U.S. Commerce Department this week.

Gross domestic product, or GDP, fell at an annual rate of 1.4% in the first quarter of 2022.

RELATED: The U.S. economy shrank 1.4% in the first quarter, but consumers continued to spend

Amid supply chain shortages, high inflation and a global pandemic, some economists say there are warnings of a possible recession.

“I think the odds of us going into a recession in 2023 are about 50/50,” said Peter Shaw, an economics professor at Tidewater Community College.

RELATED: Tight wallets: How the federal government is working to curb inflation

Shaw cited three key factors: a supply chain problem sparked by the pandemic, the impact of the war in Ukraine on food and oil prices, and large cash-to-US money supply mergers, including stimulus checks.

“Until we solve the supply chain issue and until we solve the problem of the Russo-Ukrainian war to get oil prices down again and food prices down again, I think we’re going to be a bit long-term inflation,” he said Shaw.

Shaw expects the Federal Reserve to hike interest rates to fight inflation, but even if it does, he said it won’t be enough unless key issues are addressed.

RELATED: U.S. inflation rose 8.5% last year, the highest since 1981

In a letter this week, Gus Faucher, chief economist at PNC Financial Services Group, called the economy’s latest numbers “a surprise” but said it didn’t mean a recession was imminent.

“Although GDP fell in the first quarter, the US economy is not in recession,” Faucher wrote. “Underlying demand remains strong and the labor market is in excellent shape. Growth will continue in the second quarter.”

Faucher said people are still spending and the housing market continues to expand. But Shaw thinks the increase in spending could be the result of higher prices for goods and services.

RELATED: Big banks forecast a “mild recession” in late 2023 as a result of measures to fight inflation

“I always warn people, if you’re used to paying $2.75 a gallon for gas and are now paying close to $5 for it, yes, you’re spending more money, but you’re not getting more,” he told Show .

To be on the safe side, Shaw advises people to get their finances in order.

“Prioritize what you need to buy, not what you want to buy. And take the extra cash to hoard to stave off some of the inflationary effects,” Shaw said.

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