Key economic indicators fell for the second quarter in a row, raising fears that the US could enter, or have begun, a recession.
Inflation-adjusted gross domestic product fell by 0.2% in the second quarter. This corresponds to an annual rate of decline of 0.9%.
The 0.2% decline follows a contraction of 0.4% in the first three months of the year. This, by a popular but informal definition, meant that the US economy entered a recession just two years after the last recession.
Most economists still don’t believe the economy has met the formal definition of a recession.The GDP data itself will also be revised several times in the coming months.
Still, Thursday’s data left no doubt that the recovery was losing momentum amid high inflation and rising interest rates. Both capital spending and construction activity declined in the second quarter after rising in the first quarter. Inflation-adjusted consumer spending remained positive but slowed. Adjusted for inflation, after-tax profit decreased.
“We don’t think we’re in a recession just yet,” said Aditya Bab, senior economist at Bank of America. “But more importantly here, the underlying trend in domestic demand is weakening.” So we’ve seen a clear slowdown since the first quarter.”
The slowdown itself isn’t necessarily bad news. The Federal Reserve is trying to cool the economy to keep inflation down.
“By coming out of last year’s historic economic growth and recapturing all the private sector jobs lost in the pandemic crisis, the Federal Reserve is taking action to bring inflation down,” President Biden said in a statement. So it’s no surprise that the economy is slowing.” After GDP report. “But despite facing historic global challenges, we are on the right track and will navigate this transition stronger and safer.”
Still, forecasters in recent weeks have heightened fears that the Fed’s aggressive moves (such as raising interest rates by three-quarters of a percentage point for the second straight month on Wednesday) could lead to a recession. increase. There are signs that layoffs are on the rise and that consumers are struggling to keep up with rapidly rising prices.
“The job market doesn’t need to do much better to get into a recession,” said Tim Quinlan, senior economist at Wells Fargo.