Despite two consecutive quarters of decline, the U.S. economy still does not appear to be in a recession and remains unlikely to enter one this year, National Retail Federation Chief Economist Jack Kleinhenz said yesterday.
“Back-to-back contractions have heightened fear of a recession, but while the economy has lost momentum heading into the second half of the year, economic data is not yet consistent with a typical recession,” Kleinhenz said. “Our view is that while the economy is functioning at a slower pace it is likely to avoid a recession this year. Despite ongoing uncertainties, we believe the underlying strength of the economy is strong enough to deal with inflation and keep a recession at bay – or short-lived even if we are wrong.”
Kleinhenz’s remarks came in the August issue of NRF’s Monthly Economic Review, which noted that gross domestic product declined 1.6 percent year over year in the first quarter and 0.9 percent in the second quarter. Two consecutive quarters of decline is a common informal indicator of a recession, but the official declaration is up to the National Bureau of Economic Research, which defines a recession as a significant decline spread across the economy. The bureau has yet to rule on whether the current downturn meets that definition.
Even with two quarters of GDP decline, private final sales to domestic purchasers – a key measurement of both consumer and business spending – remained in positive territory for the first half of the year, up 3 percent in the first quarter and flat in the second, the MER report said. Other indicators including employment, retail sales, income and industrial production have seen slower growth, but none have contracted.