Economic Report: U.S. economy shrinks in the second quarter, GDP shows, and invites talk of recession

by | Jul 28, 2022 | Stock Market

The numbers: The U.S. economy shrank at a annual 0.9% pace in the second quarter to mark the second decline in a row, intensifying a debate over whether the U.S has already sunk into a recession. Gross domestic producdt, the scorecard of sorts for the economy, had shrunk at a 1.6% pace in the first three months of the year. The back-to-back declines in GDP were the first since the 2007-2009 Great Recession.

A sharp drop in business investment and declining inventory levels largely accounted for the negative GDP print. Government spending also fell sharply. The lone bright spot: Consumer spending, the main engine of the economy, rose at a 1% annual clip. But that was the smallest increase since a recovery from the pandemic got underway. While two straight quarters of declining GDP has been commonly viewed as a recession, the group of prominent economists responsible for declaring official recessions takes a broader view that suggests the old rule of thumb does not always apply. The definition of recession has become a subject of fierce debate ahead of the pivotal U.S. elections in the fall. The Biden White House has argued the U.S. is not in recession, but Republicans want to pin the blame on Democrats for the slowdown in …

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