The Commerce Department’s Thursday decline in gross domestic product — the broadest measure of the economy — followed
an annual decline of 1.6% from January to March. Consecutive quarters of declining GDP are an occasional, though no longer definitive, indicator of a recession.
The record comes at a crucial time. Consumers and businesses alike suffered under the burden of punishing inflation and better borrowing prices. On Wednesday, the Federal Reserve
raised its benchmark interest rate by three-quarters to some extent for a second time in its push to ride out the worst inflation spike in four years.
The Fed hopes to achieve a notoriously tricky “soft landing”: an economic slowdown that manages to contain soaring costs without triggering a recession.
Fed Chairman Jerome Powell and many economists have mentioned that even though the economic system appears to be weakening, they doubt it is in recession. Many of them find themselves, in particular, in a tough and still robust labor market, with
11 million task opens and an unusually low rate
Unemployment rate of 3.6%, to indicate that a recession, if it occurs, is still a long way off.
THIS IS A BREAKING NEWS UPDATE. AP’s previous story follows below.
WASHINGTON (AP) – After
retreating from January to March, the US economy probably did no better in the spring.
On Thursday morning, the government will simply disclose how vulnerable financial broadening was in the April-June quarter – and likely offer clues as to whether or not the US could be nearing a recession.
The record comes at a crucial time: Wednesday, the Federal Reserve
raised its benchmark interest rate by three-quarters by some extent for 2d time instantly in its push to overcome
the worst inflation spike in four years. The Fed is aiming for a notoriously tricky “soft landing”: a financial slowdown that manages to contain soaring costs without triggering a recession.
Forecasters polled by knowledge firm FactSet estimated that the country’s gross domestic product – the broadest measure of financial output – hit a modest 0.8% annual result in the remaining quarter. As modest as it is, it can be summed up as a sharp development on the evolution of the economic system
Contraction of 1.6% during the January-March quarter.
Yet such a slow quarterly widening would be a drastic weakening of
5.7% expansion of the economic system completed the remaining year. It was the fastest widening in a calendar year since 1984, reflecting the strength with which the economy roared after the temporary but brutal pandemic recession of 2020.
Some economists worry that GDP actually shrank once again from April to June, resulting in back-to-back destructive quarters that represent a makeshift definition of recession. The
The Federal Reserve Bank of Atlanta’s working estimate of GDP growth, consistent with available financial information, points to a 1.2% decline in the second quarter.
Most economists, regardless, at the level, in particular, of a still-robust hard labor market, with
11 million job vacancies and an exceptionally low unemployment rate of 3.6%, to indicate that a recession, if one occurs, is still a long way off.
For something, the first-quarter financial contraction wasn’t as alarming as it used to be. Previously, it was primarily driven by things that did not reflect the underlying well-being of the economic system: a much larger industrial deficit, resulting from Americans’ willful urge to feed on foreign-made items , has reduced the problems of first-quarter magnification by 3.2 proportions. And a decline in business inventories after the holiday season reduced a further proportion level of 0.4.
The Power of the U.S. Task Market, Fed Chairman Jerome Powell
mentioned at a news convention on Wednesday, “makes you interrogate GDP information.”
The economic system released some encouraging news on Wednesday: June’s experiences with the industry deficit (narrower), inventories (higher) and high-priced manufacturing unit orders (higher than expected) suggested that 2Q GDP might become more powerful than in the dreaded past. JP Morgan economists doubled their forecast for expansion from April to June to an annual rate of 1.4%.
Even so, recession risks are growing because Fed policymakers are pursuing a competitive process of fee hikes that, while they will ease in the coming months, will most likely extend well into 2023. The hikes of the Fed have already resulted in a doubling of
the common charge on a loan contracted over 30 years last year, at 5.5%.
Home sales, which can be particularly sensitive to interest rate adjustments, fell.
Some economists echoed a statement Powell made at his Wednesday briefing convention: That the economic system, looked at as a whole, appears to no longer be in the grip of recession.
“We do not assume that the economic system is currently in a recession,” Tim Quinlan and Shannon Seery, economists at Wells Fargo, wrote this week.
Quinlan and Seery estimated that GDP grew at a glacial annual rate of 0.2% in the April-June quarter – “a harbinger of the worst to come as we forecast the ce
onomy to enter a mild recession early next year.
Even if the economy reports an instantly destructive second quarter of GDP, most economists would no longer consider it a signal of a recession.
The most widely accepted definition of recession is the one decided by the National Bureau of Economic Research, a group of economists whose
The Business Cycle Dating Committee defines a recession as “a significant decline in economic activity that spreads throughout the economy and lasts for more than a few months.”
The committee assesses a range of things before publicly mentioning the death of a financial broadening and the onset of a recession – and it does so regularly after the truth.