The U.S. economy contracted at an annual rate of 0.9% during the April-June quarter, raising fears about a recession, according to apnews.com. The decline follows a 1.6% annual drop during the first quarter of 2022.
The GDP report for the second quarter pointed to weakness across the economy. Consumer spending slowed, business investment fell and inventories declined as businesses slowed their restocking. Additionally, higher borrowing rates affected home construction, which shrank at a 14% annual rate, and government spending dropped.
Federal Reserve Chair Jerome Powell and many economists have said although the economy appears to be weakening, they doubt it is in recession, pointing to the robust labor market with 11 million job openings and a low 3.6% unemployment rate.
“The back-to-back contraction of GDP will feed the debate about whether the U.S. is in, or soon headed for, a recession,” said Sal Guatieri, senior economist at BMO Capital Markets. “The fact that the economy created 2.7 million payrolls in the first half of the year would seem to argue against an official recession call for now.”
The first of three estimates of GDP for the second quarter marks a dramatic weakening from the 5.7% growth the economy reached in 2021—the fastest calendar-year expansion since 1984. The Department of Labor’s consumer price index soared 9.1% in June from a year earlier, and despite widespread pay raises, prices are surging faster than wages.
