Battered by rising consumer prices and rising interest rates, the US economy shrank at a 0.6% annual rate in the April-June period, unchanged from its previous estimate in the second quarter, the government announced Thursday.
It was the second consecutive quarter of economic contraction, one of the informal signs of a recession.
Most economists say that given the strength of the US labor market, the world’s No. 1 economy has yet to slip into recession, but they fear it will go that way as the Federal Reserve raises interest rates to fight inflation. .
Consumer spending increased at a 2% annual rate, but falling business inventories and housing investment offset that increase.
The US economy has sent mixed signals this year. GDP fell in the first half, but the labor market has remained strong. Employers have created an average of 438,000 jobs this year, down only from 2021. Unemployment remains at 3.7%, a historically low figure. There are two jobs for every unemployed person.
But the Fed has raised interest rates five times this year, most recently on Sept. 21, to curb consumer prices, which rose 8.3% in August from a year earlier even as prices fell. of gasoline.
Rising cost of borrowing raises the danger of recession and rising unemployment. “We have to put inflation behind us,” Fed Chairman Jerome Powell said last week. “I wish there was a painless way to do it. There is not”.
Thursday’s report from the Commerce Department was the third and final on growth in the second quarter. The first on the performance of the economy in July-September comes out on October 27.
Economists expect GDP to grow again in the third quarter, at a modest 1.5% annual rate, according to a survey by the data firm FactSet.
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