The U.S. 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.
The median projection in a Bloomberg survey of economists called for a 0.4% advance in GDP and a 1.2% rise in consumer spending. The details of the report showed decreases in business and government spending and residential investment. Inventories also weighed on GDP.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% pace in the second quarter compared with a 2% 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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