Sliding GDP (the measure of economic growth) fell in the second quarter by 0.9%, following a 1.6% decline in the first quarter. Two consecutive quarters of negative GDP growth is the textbook definition of a recession, but the official declaration of a recession comes from a committee that deliberates on the topic and likely won’t make an announcement on the matter for a few months. Moral of the story: Most economists actually don’t expect the committee to consider this an official recession because some of the things impacting this quarter’s negative print (like inventory levels) were more volatile and one-time items than indicative of something more structural. That being said,…

Uh oh Business activity in the US contracted for the first time in two years during the month of July as a big slowdown in our services sectors outweighed the anemic growth we’re still seeing in the manufacturing side of the economy. As measured by the S&P US Composite PMI Output Index, business activity in the services sector fell to 47 compared to the expectations for the index to come in at 52.6 (anything below a 50 here indicates a contractionary environment, while anything above a 50 would indicate growth). This pessimism was matched by the Philly Fed’s regional activity index, which fell deeper into contractionary territory. Moral of the story:…

Inflation Station Inflation, have you heard of it? We got two inflation reports this week – the consumer price index and the producer price index. Typically, the producer price index is a precursor to what consumer prices might do in the future as higher/lower costs get passed from producers to their customers. While we’ve been looking for inflation to start slowing, both prints came in higher than expected. Producer prices increased 11.3% in the last year – 90% of it was driven by higher energy costs. Consumer prices came in 9.1% higher than last year. While food and energy drove a lot of the increase in prices, the inflation is…

Looking for cracks The US added 372k new jobs in June as the labor market continues to remain strong despite everything else falling apart. Economists were expecting only 250k new jobs, so this is one of seemingly few areas right now where this country is exceeding expectations. That being said there are signs in this report of things slowing, which is to be expected given the looming recessionary fears in the market, making employers a bit more cautious about their hiring plans. The size of the labor force fell for the second time in the last three months, which is indicative of hiring slowing or jobs becoming more difficult to…

Negative revisions Economic growth for the first quarter was revised to a -1.6% number, mainly driven by softening in business inventories, government spending, and residential investments though consumer spending helped offset some of that. A big part of the business spending was driven by the big spike in COVID from the omicron wave causing big business disruptions. We also saw government assistance programs expire or taper off for businesses and households. Moral of the story: Two quarters in a row of negative GDP growth is the technical definition of a recession. If we had negative growth in the first quarter and manage to put up negative growth in the second quarter…