The U.S. economy shrank by a 1.4-percent annualized rate in the first quarter of 2022 as the Omicron variant of COVID-19 and tapering government spending hit consumers and business, government data showed on Thursday.

That was the first decline since the pandemic recession nearly two years ago.

The result was far worse than the mild increase analysts had expected. Economists polled by Reuters had forecast the economy growing at a rate of 1.1 percent.

The slump in output reflected a wider trade deficit and moderate pace of inventory accumulation.

The Federal Reserve is expected to hike interest rates by 50 basis points next Wednesday, and soon start trimming its asset holdings. The U.S. central bank raised its policy interest rate by 25 basis points in March, the first rate hike in more than three years, as it fights inflation. Annual consumer prices increased in March at their quickest pace in 40 years.

Concerns remain that the Fed could aggressively tighten monetary policy and tip the economy into recession over the next 18 months. The U.S. housing market is already showing signs of slowing, with the 30-year fixed mortgage shooting above 5 percent.

(With input from agencies)