US economy shrank 0.9% last quarter, its second straight drop

WASHINGTON: The U.S. economy shrank from April through June for a second straight quarter, contracting at a 0.9 per cent annual pace and raising fears that the nation may be approaching a recession.

The decline that the Commerce Department reported Thursday in the GDP the broadest gauge of the economy followed a 1.6 per cent 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 threequarters of a point for a second straight time in its push to conquer the worst inflation outbreak in four decades.

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 of them point, in particular, to a still-robust labour market, with 11 million job openings and an uncommonly low 3.6 per cent unemployment rate, to suggest that a recession, if one does occur, is still a ways off. After going backward from January through March, the U.S. economy probably didn’t do much better in the spring.

On Thursday morning, the government will reveal just how weak economic growth was in the April-June quarter and perhaps offer clues about whether the United States may be approaching a recession.

On Wednesday, the Federal Reserve raised its benchmark interest rate by a sizable threequarters of a point for a second straight time in its push to conquer the worst inflation outbreak in four decades.