U.S. economic activity contracted for the second consecutive quarter in Q2, data from the Commerce Department showed Thursday.
The Bureau of Economic Analysis' advance estimate of Q2 U.S. gross domestic product (GDP) showed a 0.9% annualized decrease in economic growth for the three-month period ended June 30.
Economists surveyed by Bloomberg expected data to show the U.S. economy grew at an annualized pace of 0.4% last quarter.
The decline in GDP comes after U.S. economic activity unexpectedly fell 1.6% during the first quarter, the first negative reading since the second quarter of 2020. Two straight negative GDP prints meets the unofficial definition of a recession.
The National Bureau of Economic Research (NBER), however, says a recession "is a significant decline in economic activity that is spread across the economy and that lasts more than a few months."
The government's preliminary reading on second-quarter GDP — the broadest measure of economic activity — comes one day after Federal Reserve Chair Jerome Powell told reporters at a press conference that he did not believe the economy is in a recession, even as other economic indicators show signs of softening.
The Bureau of Economic Analysis attributed the decline in GDP to broad-based decreases across private inventory investment, residential and nonresidential investment, and federal, state and local government spending.
A decrease in retail trade, primarily across general merchandise stores and motor vehicle dealers, dragged down inventory investment, while the fall in residential investment was weighed down by factors including brokers' commissions, the report said.
Capital Economics Senior U.S. Economist Andrew Hunter indicated in a note that while the GDP reading was "disappointing," it did not necessarily indicate that the economy is in a recession.
"The decline was partly due to a huge drag from inventories, while most other coincident indicators, particularly employment, show continued expansion," he added. "That said, the details show that higher rates and surging inflation are weighing on underlying demand, and we expect only a muted rebound in economic growth over the second half of the year."
Personal consumption expenditures (PCE) — or consumer spending — which comprises roughly two-thirds of domestic activity rose at a pace of just 1%, a slowdown from the prior quarter. Bloomberg consensus data showed economists expected a 1.2% increase in consumption.
The deceleration came as inflation surged at the fastest annual rate since 1981, weighing on Americans' ability to afford the costs of gas, food, and shelter.