The U.S. economy shrank in the first three months of the year, and faces threats from high inflation and rising interest rates, yet economists foresee a return to growth for the rest of 2022 based on the strength of the job market and consumer spending, AP reported.

The first quarterly decline in gross domestic product since the pandemic hit in 2020—a 1.4% drop on an annualized basis—is not likely a prelude to recession, economists say. That may bring little comfort to President Joe Biden and Democrats, who face mid-term elections this year in which rising prices for food, energy and other essentials will be a major theme of Republican opposition.

Two trends were key drivers of the U.S. economy’s decline last quarter, according to Thursday’s report from the Commerce Department.

— Imports soared nearly 20% as Americans spent heavily on foreign-made goods, while exports fell almost 6% as growth slowed overseas — a widening of the trade deficit that subtracted 3.2 percentage points from GDP.

— Businesses had built inventories aggressively ahead of last year’s holiday shopping season, when they feared pandemic-related supply shortages, so they restocked more slowly at the start of 2022, denting GDP by 0.8 percentage points.

As a result, the nation’s total output of goods and services fell far below the 6.9% annual growth rate in the fourth quarter of 2021.

However, rising wages supported robust spending by households, and higher profits drove investment by companies. These factors suggest strong fundamentals for the U.S. economy, even in the face of challenges from the pandemic, the war in Ukraine and the Federal Reserve’s plans to raise interest rates to fight inflation.

The US job market remains robust, with the unemployment rate near a 50-year low of 3.6%, and wages rising steadily. And in the January-March quarter, businesses and consumers increased their spending at a 3.7% annual rate after adjusting for inflation.

Still, serious threats have emerged. Supply chain disruptions in China and elsewhere are still a pandemic-era reality, and the war in Ukraine is contributing to higher inflation, which erodes consumers’ spending power. Last month, prices jumped 8.5% from a year earlier, the fastest such rise in four decades.

Although imports surged in the first quarter, COVID lockdowns in China are likely to perpetuate supply shortages this year. Ford and General Motors said this week that they still can’t get all the computer chips they need, costing them sales and forcing temporary plant closures.

Thursday’s GDP report showed that US consumers are adjusting their spending patterns as the pandemic fades and as higher costs for food and gas eat into household budgets. Adjusting for inflation, spending on clothes, gasoline, and groceries fell in the first quarter. But Americans spent more on services, including travel and dining out.

The Fed had hoped that such a shift would bring down inflation, as goods prices have shot up more than services in the past year. But now prices for airline tickets, hotels, and restaurant meals are also rising.