A key measure of economic output fell for a second straight quarter, raising fears that the United States may be entering a recession, or that one may have already begun.
Gross domestic product, adjusted for inflation, fell 0.2 percent in the second quarter, equivalent to an annual rate of decline of 0.9 percent, the Commerce Department said Thursday.
The 0.2 percent decline followed a 0.4 percent contraction in the first three months of the year, meaning that, by a common but unofficial definition, the U.S. economy has entered recession just two years after emerging from the last one.
Most economists still do not believe the economy meets the formal definition of a recession, which is based on a broader set of indicators that include measures of income, spending and employment. The GDP data will also be revised several times over the coming months.
Still, the data released on Thursday left no doubt that the recovery is losing steam amid high inflation and rising interest rates. Business investment and construction activity fell in the second quarter after rising in the first. Consumer spending, adjusted for inflation, remained positive but slowed.
“We don’t think we’re in a recession yet,” said Aditya Bhave, senior economist at Bank of America. “But the bigger point here is that the underlying trend in domestic demand is weakening. You see a clear slowdown from the first quarter.”
A slowdown, by itself, is not necessarily bad news. The Federal Reserve has been trying to cool the economy to try to control inflation, and the White House has argued that the slowdown is part of an inevitable and necessary transition to a period of steadier growth after the rapid recovery of the ‘last year.
But forecasters in recent weeks have grown increasingly concerned that the Fed’s aggressive moves, including raising interest rates by three-quarters of a percentage point on Wednesday for the second month in a row, will lead to a recession. There are signs that layoffs are increasing and that consumers are struggling to keep up with rapidly rising prices.
“The labor market doesn’t have to turn that hard for us to have a recession,” said Tim Quinlan, senior economist at Wells Fargo.