The U.S. economy contracted less than initially thought in the second quarter, tamping down fears that a recession has been underway
Second-quarter GDP contraction revised to 0.6% from 0.9%Weekly jobless claims drop 2,000 to 243,000
"We have had a tremendous recovery, this is a mid-cycle slowdown and not a recession," said Brian Bethune, an economics professor at Boston College. "Employment is still growing, which means basically, production is still growing, but there are these supply chain problems."Gross domestic product shrank at a 0.6% annualized rate last quarter, the government said in its second estimate of GDP. That was an upward revision from the previously estimated 0.9% pace of decline.
Inventories rose at a $83.9 billion rate last quarter after increasing at a $188.5 billion pace in the first quarter. They subtracted 1.83 percentage points from GDP. Consumer spending grew at a 1.5% pace, revised up from the previously reported 1.0% rate. Shortages and the resulting higher prices have crimped spending.
"Hopefully at some point we will have fewer supply chain disruptions and production will catch up," said Bethune. "Production will be higher than income, but we are a long way from that." National after-tax profits without inventory valuation and capital consumption adjustments, conceptually most similar to S&P 500 profits, increased $284.9 billion, or at a 10.4% pace, accelerating from the 1.0% growth pace in the January-March period. They were boosted by gains in the energy sector as oil prices soared because of the Russia-Ukraine war.
The labor market is a key piece of that puzzle. Though interest rate-sensitive industries like housing and technology are laying off workers, broad-based job cuts have yet to materialize, leaving the overall labor market tight.
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