Economic Report: GDP contracted at 0.6% annual pace in the spring

by | Aug 25, 2022 | Stock Market

The numbers: The economy contracted at an annual 0.6% pace in the second quarter, updated figures show, as high inflation and rising interest rates sapped U.S. growth. Initially the government said gross domestic product, the scorecard of sorts for the economy, had shrunk at a 0.9% clip in the three months covering April to June.

The chief source of the upward revision: Somewhat stronger consumer spending and a bit more investment in business inventories than previously reported. Consumers boosted inflation-adjusted outlays by 1.5% in the spring instead of 1% as previously reported. Household spending accounts for about 70% of the economy and is the main engine of U.S. growth. Still, the decline in GDP in the second quarter was the second in a row, reflecting a broad slowdown in the U.S. The economy shrank by 1.6% in the first three months of the year. Early estimates of third-quarter GDP, however, point to a resumption of growth. The economy is still expanding, a passel of recent indicators show, but at a slower pace. Economists surveyed by The Wall Street Journal had forecast a revised 0.5% decline in second-quarter GDP. All figures are adjusted for inflation. Big picture: An old rule of thumb suggests two straight declines in GDP signifies recession, but economists say the negative readings in the first half of the yea …

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