Gross domestic product, a wide-ranging measure of economic activity, fell by 0.9 per cent on an annualised basis from April to June. That decline marks a key symbolic threshold for the most commonly used – albeit unofficial – definition of a recession as two consecutive quarters of negative economic growth.
The hotly-anticipated data release has taken on outsized significance as investors, policymakers and ordinary Americans seek some measure of clarity in the current muddled economic environment, CNN reported.
The negative dip shown in Thursday’s first read on second-quarter GDP activity — data that will be revised two more times — was driven mostly by a decline in inventory levels.
Businesses in recent quarters have tried to replenish stockpiles drawn down during the pandemic — and in trying to adjust for supply chain upheaval, they’ve found themselves overstocked at a time when consumers have pulled back on some purchases. Investments made in inventory during the second quarter were therefore lower than they were in the first quarter.
“The general takeaway is the economy is slowing, and that’s what the (Federal Reserve) wants,” said Ryan Sweet, who leads real-time economics at Moody’s Analytics, CNN reported. “We’re not in a recession.”
Although Thursday’s initial estimate marked a sharp drop from the 6.7 per cent expansion the economy underwent in the second quarter of 2021, the White House has been adamant that the world’s largest economy, despite being buffeted by decades-high inflation and a cascade of supply shocks, remains fundamentally sound.