WASHINGTON: The US economy unexpectedly contracted in the second quarter, with consumer spending growing at its slowest pace in two years and business spending declining, which could fan financial market fears that the economy was already in recession.
The second straight quarterly decline in gross domestic product reported by the Commerce Department on Thursday largely reflected a more moderate pace of inventory accumulation by businesses because of ongoing shortages of motor vehicles.
Slowing consumer spending has also left retailers with little appetite to accumulate more stock. The back-to-back decline in GDP against the backdrop of aggressive monetary policy tightening by the Federal Reserve could force the US central bank to scale back its massive interest rate increases.
“The economy is highly vulnerable to slipping into a recession,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. “That might discourage the Fed from ramming through another large rate hike in September.”
Gross domestic product fell at a 0.9% annualised rate last quarter, the government said in its advance estimate of GDP. –Agencies
