DORAL, FL – GDP in the US fell by 0.9% on an annualized basis in the second quarter of the year, according to a report released on Thursday by the Bureau of Economic Analysis.
Gross domestic product, the broadest measure of the economy that encompasses the total level of goods and services produced during the period, showed a negative number for the second time in a row after a 1.6% decline in the first quarter.
However, this fact alone is not an indicator of whether or not the country is in recession, although it does prove the economy’s growth is not moving at the correct pace, as stated by Mark Zandi, chief economist at Moody’s Analytics, to CNBC.
“We’re not in recession, but it’s clear the economy’s growth is slowing. The economy is close to stall speed, moving forward but barely.”
According to experts, the new data was driven mainly by a decline in inventory levels as well as a decrease in residential and nonresidential investment, and government spending at the federal, state and local levels. Gross private domestic investment tumbled 13.5% for the three-month period.
On the other hand, consumer spending, as measured through personal consumption expenditures, increased just 1% for the period as inflation accelerated while spending on services accelerated during the period by 4.1%, but that was offset by declines in nondurable goods of 5.5% and durable goods of 2.6%.
Another factor that had to do with the current scenario is inflation. The consumer price index rose 8.6% in the quarter, the fastest pace since Q4 of 1981. That resulted in a decline of inflation-adjusted after-tax personal income of 0.5%, while the personal saving rate was 5.2%, down from 5.6% in the first quarter.
Despite this negative outcome, economists warn numbers can change and probably will, which is one of the main reasons why calling a recession it’s still premature. Subsequent revisions to first-quarter GDP figures, for instance, changed from an initial drop of 1.4% to 1.6%. Thursday’s numbers are the first of three estimates.
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