Latest GDP reading confirms US economy shrank for two consecutive quarters, supporting one definition of a recession
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CNN Business
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The US economy shrank 0.6% during the second quarter of the year, according to the latest gross domestic product estimate from the Bureau of Economic Analysis released Thursday.
That matches the latest GDP estimate and shows the economy was in contraction throughout the first half of the year as businesses readjusted to supply chain disruptions from the pandemic.
The latest economic scorecard could reignite the debate over whether the US has been in a recession, usually defined as two consecutive quarters of negative growth. Some economists and policymakers have dismissed claims of an early recession in 2022, citing robust job growth, consumer spending and manufacturing.
However, the official judge is a panel of National Bureau of Economic Research economists, who take a variety of economic indicators into account and may revise the data years later.
Thursday’s third estimate of second-quarter GDP is based on more complete data than was available last month, reflecting upwardly revised levels of consumer spending, federal government spending and business investment. These were offset by a downward adjustment in exports and investment in housing, the BEA said.
Gross domestic income, an alternative economic measure of the income and costs of production, was revised down by $47.4 billion to $305.7 billion.
“The annual revisions to GDP and gross national income indicate a weaker US economy in the first half of 2022 than initially reported,” Gus Faucher, chief economist for The PNC Financial Services Group, wrote in a note issued Thursday.
The US economy is in transition through 2022 and the data is conflicting, he said, noting strength in areas such as the labor market, output and spending.
However, recession risks remain high, Abbey Omodunbi, PNC’s assistant vice president and senior economist, told CNN Business, citing the Federal Reserve’s aggressive rate hikes to combat historically high inflation.
“And with that, we’re going to see a significant slowdown in the U.S. economy, particularly in interest rate-sensitive sectors” such as housing and business investment, he said.
The global outlook is even bleaker: There is a 98.1% chance of a global recession, according to a probability model run by Ned Davis Research, which highlights Russia’s war in Ukraine and central banks’ drastic rate hikes to curb inflation.
The only other times the recession model was this high have been during severe economic downturns, most recently in 2020 and during the 2008 global financial crisis.
The first estimate for third quarter GDP is set to be released on October 27.
CNN Business’s Matt Egan contributed to this report.
