U.S. Economy Dwindled Worse-Than-Expected 1.6% Last Quarter As Recession Fears Heighten

The US economy posted its worst annualized showing in the last quarter since the pandemic-induced recession in 2020, according to an updated release Wednesday. Real gross domestic product declined at an annualized rate of 1.6%, according to the BEA’s third and final revisions for the quarter.

It also pointed an unexpected decline in economic activity on the omicron variant of Covid-19 and decreased government assistance slowed the economy.

Even though the US economy quickly rebounded after the COVID-induced recession in 2020, the Fed’s withdrawal of pandemic stimulus measures, Russia’s invasion of Ukraine and spiking prices have heightened market uncertainty this year.

Last quarter, the stock market posted its worst showing since the market crash in early 2020, with the S&P falling 5% and the tech-heavy Nasdaq 9%.

To avoid a technical recession which is technically the two consecutive quarters of negative GDP growth, economists are widely calling for a return to growth this quarter. Meanwhile, the picture does not look rosy at all when there is a growing wave of experts have warned odds of a recession next year are growing.

Analysts at S&P Global Ratings in a research note said aggressive Federal Reserve policy to combat ongoing price spikes will usher in low economic growth this year and potentially risk a recession, by warning: “What’s around the bend next year is the bigger worry.”

S&P put the odds of a recession in 2023 at 40%—more than the 35% odds Morgan Stanley issued last week.

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