GDP report shows US economy has shrunk further: live updates

A key measure of economic output has fallen for the second straight quarter, raising fears the United States is entering a recession – or perhaps it has begun.

Gross domestic product, adjusted for inflation, fell 0.2% in the second quarter, equivalent to an annual rate of decline of 0.9%, the Commerce Department said Thursday.

The 0.2% drop followed a 0.4% contraction in the first three months of the year, meaning that by a common but unofficial definition, the US economy barely entered a recession. two years after its last release.

Most economists still don’t believe the economy meets the formal definition of a recession, which is based on a broader set of indicators including measures of income, spending and employment. The GDP data itself will also be revised several times in the coming months.

Still, data released on Thursday leaves little doubt that the recovery is running out of steam amid high inflation and rising interest rates. Business investment and construction activity both declined in the second quarter after rising in the first. Consumer spending, adjusted for inflation, remained positive but slowed. After-tax income decreased after adjusting for inflation.

“We don’t think we’re in a recession just yet,” said Aditya Bhave, senior economist for Bank of America. “But the bigger point here is that the underlying trend in domestic demand is weakening. You see a sharp deceleration from the first quarter.

A deceleration, in itself, is not necessarily bad news. The Federal Reserve has tried to calm the economy in an effort to keep inflation under control, and the White House has argued that the slowdown is part of an inevitable and necessary transition to a period of more stable growth after the rapid recovery of Last year.

“After last year’s historic economic growth – and the recovery of all the private sector jobs lost during the pandemic crisis – it is not surprising that the economy is slowing as the Federal Reserve acts to reduce inflation. “, President Biden said in a published statement. after the GDP report. “But even though we face historic global challenges, we are on the right path and will come through this transition stronger and safer.”

Still, forecasters in recent weeks have become increasingly concerned that the Fed’s aggressive moves — including raising interest rates by three-quarters of a percentage point on Wednesday for the second consecutive month — will lead to a recession. There are signs that layoffs are on the rise and consumers are struggling to keep pace with rapidly rising prices.

“The labor market doesn’t have to turn around so much for us to have a recession,” said Tim Quinlan, senior economist at Wells Fargo.

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