The US economy shrank for a second straight quarter, raising chances of a recession, as decades-high inflation undercut consumer spending and Federal Reserve interest-rate hikes stymied business investment and housing demand.
Two-year Treasury yields tumbled after the report reduced chances of further aggressive Fed rate increases, while US stock futures remained lower and the dollar erased gains. A key gauge of underlying demand that strips out the trade and inventories components -- inflation-adjusted final sales to domestic purchasers -- fell at a 0.3 per cent pace in the second quarter compared with a 2 per cent gain in the prior period.
While the common rule of thumb for recessions is two consecutive quarterly declines in GDP, the official determination of ends and beginnings of business cycles is made by a group of academics at the National Bureau of Economic Research. Retailers like Walmart Inc. and Target Corp. have slashed their profit forecasts, and a slew of tech companies, including Shopify Inc., have announced plans in recent weeks to cut workers. Others, like Apple Inc. and Microsoft Corp. are slowing hiring.
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