WASHINGTON (NewsNation) — The U.S. economy shrank from April through June for a second straight quarter, contracting at a 0.9% annual pace and raising fears that the nation may be approaching a recession.
The decline that the Commerce Department reported Thursday in the gross domestic product — the broadest gauge of the economy — followed a 1.6% annual drop from January through March. Consecutive quarters of falling GDP constitute one informal, though not definitive, indicator of a recession.
The report comes at a critical time. Consumers and businesses have been struggling under the weight of punishing inflation and higher borrowing costs.
On Wednesday, the Federal Reserve raised its benchmark interest rate by a sizable three-quarters of a point for a second straight time in its push to conquer the worst inflation outbreak in four decades. The Fed is aiming for a notoriously difficult “soft landing”: an economic slowdown that manages to rein in rocketing prices without triggering a recession.
Fed Chair Jerome Powell and many economists have said that while the economy is showing some weakening, they doubt it’s in recession. Many economists, though, point, in particular, to a still-robust labor market, with 11 million job openings and an uncommonly low 3.6% unemployment rate, to suggest that a recession, if one does occur, is still a ways off.
This comes as the latest NewsNation/Decision Desk HQ poll found that voters’ fears about inflation are rising, surpassing their concerns about unemployment. More than 62% of voters surveyed ranked inflation chief atop their concerns facing the country, rising above their worries about unemployment, COVID-19 and crime.
The strength of America’s job market, Fed Chair Jerome Powell said at a news conference Wednesday, “makes you question the GDP data.”
Even so, recession risks are growing as the Fed’s policymakers pursue an aggressive course of rate hikes that, while they may ease in the months ahead, will likely extend into 2023. The Fed’s hikes have already led to a doubling of the average rate on a 30-year fixed mortgage in the past year, to 5.5%. Home sales, which are especially sensitive to interest rate changes, have tumbled.
This story is developing. Refresh for updates.
The Associated Press contributed to this report.