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Consumers brace themselves as fears of a recession increase

The U.S. economy is in decline for a second straight quarter
Posted at 5:32 AM, Jul 29, 2022
and last updated 2022-07-29 10:40:34-04

BALTIMORE — New data released this week has many wondering if the U.S. is in a recession. On Wednesday, the Fed hiked interest rates 0.75% to slow down inflation. Then on Thursday, the U.S. Bureau of Economic Analysis released the latest GDP numbers showing the value of goods and services produced in the country, is down for a second straight quarter.

The general rule of thought is that two consecutive quarters of economic decline equals a recession, but the organization which makes it official hasn't called it yet.

The value of goods and services produced in the United States, otherwise know as gross domestic product or GDP for short, dropped in the second quarter of 2022 by 0.9%.

While GDP is in decline for a second quarter in a row, GDP decreased less in the second quarter of 2022 than it did during the first quarter of the year.

The first quarter of this year saw a one point six percent drop in GDP.

The U.S. Bureau of Economic Analysis made the announcement this week which might make some economists nervous.

It's up to a non-profit organization called the National Bureau of Economic Research to make the official distinction whether the country has entered a recession.

The bureau notes some factors which caused the economy to shrink are decreases in retail and motor vehicle sales, as well as decreases in real estate sales and government spending.

Although the report states a decrease in non-defense government spending was partly offset by an increase in defense spending.

On the plus side, there were some bright spots where the economy grew. There were increases in areas such as industrial supplies and materials, travel, food service and healthcare.

Despite a second consecutive quarter decline in GDP, MoneyTips senior credit industry analyst Nathan Grant says the report is not all doom and gloom for consumers.

“One of the things that came out from the report, and since, a lot of the discussions this week leading up to it, is that the growth is slowing. So, we’re still seeing that trend and the direction that even though we’re not at a recession yet and spending is up, along with the unemployment rate being down,” Grant said.

“Those are things that, the positivity there is starting to slow, so the rate of it is changing, and that’s where we have to keep an eye on these things,” Grant added.

The GDP report is just an initial estimate as the U.S. Bureau of Economic Analysis will release a "second" estimate for the second quarter using more complete data comes out in August and then a third update in September.

"When you think about what people are thinking about day to day, I don’t think people are thinking about GDP report data, and stuff, changes to the economy like that, even if they will be affected by it. They’re not thinking about that everyday when they wake up, but inflation, you go to the store, you’re on the way to the store, you get gas, all these things are being affected by the prices, so that’s what I think is important to focus on," Grant said.

However, with a second consecutive quarter decline in GDP, Grant said there are things consumers have no control over like Fed rate hikes, inflation, and the overall economy, but he recommends people use this time to focus on what they can control.

"Things like the amount of debt you’re carrying, your credit scores, some people are carrying student loan debt that they want to pay down, it’s stuff like that, that you got to go OK, regardless of what’s going on, on the big picture, what can I do to help my situation," Grant said.

Grant recommends consumers take a look at what their spending their money on, where they’re spending and figure out how to control that, as well as building up your emergency savings if they can should the economy take a turn for the worse