US economy shrinks in second quarter, raising recession fears
- GDP contracted at an annual rate of 0.9 per cent from April through June, following a 1.6 per cent drop in the first three months of the year
- Consecutive quarters of falling growth constitute one informal indicator of a recession
The US economy shrank from April through June for a second straight quarter, contracting at a 0.9 per cent annual pace and raising fears that the nation may be approaching a recession.
The decline that the Commerce Department reported on Thursday in the gross domestic product – the broadest gauge of the economy – followed a 1.6 per cent annual drop from January through March. Consecutive quarters of falling GDP constitute one informal, though not definitive, indicator of a recession.
The report comes at a critical time. Consumers and businesses have been struggling under the weight of punishing inflation and higher borrowing costs. On Wednesday, the Federal Reserve raised its benchmark interest rate by a sizeable three-quarters of a point for a second straight time in its push to conquer the worst inflation outbreak in four decades.
The Fed is hoping to achieve a notoriously difficult “soft landing”: An economic slowdown that manages to rein in rocketing prices without triggering a recession.
Fed Chair Jerome Powell and many economists have said that while the economy is showing some weakening, they doubt it’s in recession. Many of them point, in particular, to a still-robust labour market, with 11 million job openings and an uncommonly low 3.6 per cent unemployment rate, to suggest that a recession, if one does occur, is still a ways off.
