US economy shrinks in second quarter, signaling unofficial start of recession

The US economy shrank again in the last three months, unofficially signaling the start of a recession.

The bad news will be a major blow for the Biden administration as it prepares for a tough midterm election season. White House officials have tried to tamp down talk of a recession, arguing that many parts of the economy remain strong.

The growth rate stands in marked contrast to the robust 6.9% annual increase in GDP recorded in the final quarter of 2021 when the economy roared back from Covid shutdowns.

The latest GDP figures came a day after the Fed announced another three-quarter of a percentage point increase in its benchmark interest rates as it fights to tame inflation.

Prices rose at an annual rate of 9.1% in the year to June, driven up by soaring costs for fuel, food and shelter.

The confusing economic outlook has triggered sell-offs in stock markets around the world and led some economists to predict a recession is coming. Nearly 70% of leading academic economists polled by the Financial Times last month predicted the US economy will tip into a recession next year.