While the second consecutive quarterly drop in gross domestic product (GDP) revealed by the Commerce Ministry on Thursday largely reflects a more moderate pace of inventory build-up for companies due to the persistent shortage of cars, the overall economic situation has appeared weak while exports were the only bright spot.
This may discourage the Federal Reserve (the US central bank) from continuing to raise interest rates sharply, while trying to rein in high inflation. On Wednesday, the central bank raised the interest rate by three-quarters of a percentage point, bringing the total rate hike since March to 225 basis points.
The Commerce Department said in its estimates for gross domestic product, on Thursday, that it fell by 0.9 percent on an annual basis in the second quarter. Economists polled by Reuters had forecast gross domestic product growth of 0.5 percent. According to Reuters.
Estimates ranged from a low deflation rate of 2.1 percent to a high growth rate of 2.0 percent. The economy shrank 1.6 percent in the first quarter.
The economy shrank 1.3 percent in the first half, which meets the definition of a “technical stagnation”. But economists say the economy is not yet in a recession, according to broader measures of economic activity.
The National Bureau of Economic Research, which officially defines recessions in the United States, defines a recession as “a marked decline in economic activity in various sectors of the economy that lasts for more than a few months and is usually observed on indicators of production, employment, real income, and others.”
Job growth averaged 456,700 per month in the first half of the year, while domestic demand continued to grow, yielding solid wage gains.
However, increased risks of economic downturn. Home construction and sales have fallen, while business and consumer sentiment has fallen in recent months.
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