Commerce Department Reports Show US Officially In Recession

On Thursday, the U.S. Commerce Department released an estimate of economic activity in the second quarter, showing a 0.6 percent decrease in real GDP.

The second quarter decrease follows a first quarter dip of 1.6 percent, meaning the U.S. has now had two negative quarters in a row and the economy is in a recession.

Technically, the decision will be made by The National Bureau of Economic Research’s Business Cycle Dating Committee, who will use the Commerce Department’s data along with other information to make the determination.

The Commerce Department indicated that an upward tick in consumer spending was mitigated by a downward revision to exports. Other factors include decreases in private inventory investment, federal government spending, and state and local government spending.

Capital Economics Senior U.S. Economist Andrew Hunter predicted that the Fed will use the Commerce Department’s report as evidence in favor of increasing interest rates.

“To the extent that there are any clear implications for the Fed, that will further support officials’ current hawkish stance,” said Hunter.

The Commerce Department’s report updated the annual growth rate of core consumer prices in the second quarter from 4.8 percent to 5.0 percent. Despite the revision, the second quarter rate still falls behind the first quarter growth rate of 5.3 percent.

The Commerce Department also released information showing a downturn in the housing market, with projections showing that home sales are occurring at a seasonally adjusted rate of 495,000 homes per year. That figure would represent the slowest rate of sales since October 2015.

After a blazing start to the year, the housing market has cooled drastically, as homebuyers struggle to afford rising interest rates.