Atlanta Fed data shows US may be in recession
The Federal Reserve’s main gauge of US economic activity currently estimates that gross domestic product shrank more in the second quarter than in the first, raising fears that the country may already be in a recession.
The latest reading from the Atlanta Federal Reserve’s GDP Now Model, the central bank’s primary tool for measuring growth in real time, on July 1 indicated that real GDP contracted 2.1% on a seasonally adjusted annual rate in the second quarter.
This is down 1.1% from the GDP reading, now -1.0% from the previous day, when the measure turned negative. The next estimate will be released from the tracker on Thursday.
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While an official advance estimate of second-quarter performance will not be available until the end of the month, these preliminary readings show the second consecutive quarter of negative growth in the economy after GDP shrank 1.6% in the first quarter.
If additional readings confirm that the economy did indeed contract in the second quarter, the technical criteria for a recession, defined by two consecutive quarters of negative growth, will be met. However, the National Bureau of Economic Research (NBER) is the official decision-making authority.
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Some economic slowdown was expected as the Federal Reserve began implementing interest rate hikes earlier in the year in an effort to cool inflation, which reached a four-decade high in May.
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The challenge for the central bank is to cut high rates without exaggerating slowing growth, but Fed Chair Powell said last week that failure to tame inflation would be a greater risk to the economy than entering a recession.