The nation’s gross domestic product shrank in the first three months of 2022, overshadowing a strong period for residential investment.

A surprising reversal in the U.S. economy’s fast-paced growth was the result of a large net decline in American exports — not its real estate industry or consumer spending.

Residential investment rose 2.1 percent in the first quarter of 2022, even as the Bureau of Economic Analysis reported a 1.4 percent decline in the country’s overall gross domestic product.

It was the first quarterly decline in economic activity since the first half of 2020, when businesses took a serious blow in the early months of the coronavirus pandemic. 

But the contraction was largely driven by reductions in American exported goods and an increasing reliance on imports, Joel Kan of the Mortgage Bankers Association said in a statement. 

The export numbers, which came during a period of global volatility amid Russia’s invasion of Ukraine, also hid more promising economic signs for the U.S. at home.

“The good news is that consumer spending remained strong, particularly for services, as much of that sector has returned close to pre-pandemic levels,” said Kan, the organization’s associate vice president for economic and industry forecasting. “Households continue to benefit from a strong job market and wage growth.”

Stocks at major American companies, which have taken a beating in recent weeks, were trading higher Thursday morning on the news.

In addition to the big decline in net exports, the country’s GDP also saw reductions in government spending. Federal spending dropped nearly 6 percent in the first quarter, with state and local governments reporting a slight decline as well.

But the country’s real estate industry remained on an upward trajectory.

Residential investment has now undergone a half-year of unbroken growth after posting big declines in the spring and summer of 2021.

Year over year, residential investment was up 14 percent for single-family structures in the first three months of 2022.

“Business investment had its largest contribution to overall growth in a year, indicating additional underlying strength in the economy,” Kan said in the statement.

The positive and negative signs contained in the report come as the economy continues to face unusually high price inflation. The Federal Reserve is expected to step in with inflation-blunting measures, which could have a slowing impact on economic growth. 

“We expect the Fed to proceed with its plans to further tighten monetary policy over the course of 2022 as inflation has not shown signs of slowing yet, especially given the resilience in consumer spending,” Kan said.

Email Daniel Houston

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