The U.S. economy has contracted for the second consecutive quarter. GDP fell by 0.9% on an annualized basis, according to FinClub, citing Bloomberg.
“The most important point is that the economy has rapidly lost momentum amid the highest inflation in four decades, rapidly rising borrowing costs, and a general tightening of financial conditions. The economy is highly vulnerable to slipping into a recession,” said Sal Guatieri, senior economist at BMO Capital Markets.
According to a preliminary estimate by the Department of Commerce, gross domestic product fell by 0.9% on an annualized basis, following a 1.6% decline in the first three months of the year. Two consecutive quarters of GDP decline constitute a technical recession, but the U.S. relies on the National Bureau of Economic Research’s definition of a recession, which is based on a broader range of factors.
Personal consumption, which accounts for the bulk of the economy, rose 1%, marking a slowdown from the previous period. Production fell in the second quarter due to weak demand. The median forecast in a Bloomberg survey of economists had projected GDP growth of 0.4% and a 1.2% increase in consumer spending.
A key measure of core demand—excluding trade and inventory components—namely, inflation-adjusted final sales to domestic customers—fell by 0.3% in the second quarter, compared with a 2% increase in the previous period.