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The Commerce Department released its advanced estimate of economic activity Thursday, showing the U.S. economy, in terms of real Gross Domestic Product (GDP), contracted by 0.9 percent in the second quarter of 2022 – marking two straight quarters of decline. In a new NAFCU Macro Data Flash report, NAFCU Vice President of Research and Chief Economist Curt Long said, “as the tiresome debate drags on as to whether that alone amounts to a recession or whether material weakening in the labor market is also necessary, the numbers clearly point to a slowing economy.”   

"The question is whether the deceleration is enough to bring down inflation, but not so much that it leads to a major recession," Long added. He pointed to nominal consumer spending, which increased nearly 8.0 percent in the second quarter, as evidence that the Fed has “much to do to address sky-high inflation.”   

According to the estimate, the decline in real GDP was mostly caused by the change in private inventories – which fell 2.01 percentage points. There was also a decline in residential investment (-0.71) and government spending (-0.33). Net exports and personal consumption increased 1.43 percent and 0.7 percent, respectively, to help offset the decline.   

The Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred inflation metric, held at 7.1 percent for a second straight quarter. Meanwhile, core PCE inflation, excluding food and energy, fell to 4.4 percent.    

Long concluded by noting that “the outlook remains concerning given that the Fed has little evidence at this point to justify pivoting off its aggressive tightening. Credit unions should be prepared for more rate hikes through the end of 2022.”   

For more economic updates from NAFCU's award-winning research team, view all of NAFCU's Macro Data Flash reports.