The Bureau of Economic Analysis reported that U.S. economy dwindled for the second straight quarter from April to June, hitting a widely accepted rule of thumb for a recession.
Gross domestic products (GDP) is the broadest measure of the economy and encompasses the total level of goods and services produced during the period. US GDP declined by 0.9% at an annualized pace for the period. This figure follows a 1.6% decline in the first quarter and was worse than the Dow Jones estimate for a gain of 0.3%.
Theoretically, a second straight negative GDP reading meets a long-held definition of a technical recession, despite the unusual circumstances of the decline and regardless of what the NBER decides.
A separate report Thursday showed that layoffs remain elevated. According to the Labour Department, initial jobless claims totaled 256,000 for the week ended July 23, a decline of 5,000 from the upwardly revised level of the previous week but higher than the Dow Jones estimate of 249,000.
The decline in GDP may be due to several factors, including decreases in inventories, 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
Meanwhile, consumption increased just 1% for the period as inflation accelerated. 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%.
Markets reacted little to the news, with stocks slightly lower at the open. Government bond yields mostly declined, with the biggest drops at the shorter-duration end of the curve.
