The US Economy shrank by 0.6% last quarter, the second quarter in a row, a third and final estimate from the Bureau of Economic Analysis confirms. The latest report shows that the economy is in a technical recession, despite economists predicting a slowdown. Hence, the government will likely declare the economy to be in another recession.
The 0.6% figure was flat from an estimate last month, however, it ticked up from the 0.9% decline estimated in July 2022. The decline in homebuying over the course of 2022 is the likely contributor to this number, the government says. The decline comes with mortgage rates continuing to rise in Q3, reaching the highest level since 2008
In addition, federal government spending and business inventories are also likely causes of the decrease. However, an uptick in exports and spending helped economic activity improve from last quarter’s decline of 1.6%, the government added.
Wells Fargo senior economist Tim Quinlan has said that four factors the NBER rely on to declare a recession—production, income, employment, and spending—continued to signal expansion through May. While Quinlan isn’t quick to confirm that the US economy is in a recession, he does warn that “it is starting to feel like [entering one] is only a matter of time.”
“We expect the loud wailing of an actual recession to begin early next year,” Quinlan adds. A technical recession doesn’t automatically confirm a recession. However, it is extremely likely given the economy’s struggles with inflation and the shrinking of the economy.