ALBANY, N.Y. (NEWS10) — The United States economy shrunk for the second consecutive quarter, raising concerns about the potential of a recession in the future. The 0.9% drop off from April through June comes after real Gross Domestic Product shrunk by 1.6% earlier this year.
“We are teetering on a recession,” said Kajal Lahiri, Distinguished Professor of Economics at UAlbany.
He expects the economy will continue to hover around 0% growth in the coming quarters, as the government continues efforts to combat inflation, “Whether you want to call it recession, okay recession, but it will be a slow recession, it won’t be a very deep reception, particularly because our job market is extremely strong.”
The economic slowdown comes as rampant inflation continues. A 9.1% increase over the last year in the most recent Consumer Price Index marks the highest inflation rate the country has seen since 1981.
Lahiri says slowing down the economy is a way to combat the issue, “Negative GDP growth, I will not pay too much attention to it right now, knowing what we have to do to lower the inflation rate,” noting that the strong labor market means the economy has wiggle room to temporarily slow.
However, recession concerns can cause understandable anxiety for consumers. Financial advisors say now is as good a time as ever to review your budget, especially if you’re facing financial challenges.
“This is the time to make some adjustments. Not make knee-jerk reactions, not make emotional decisions, history has taught us this repeatedly, that that’s usually a bad idea. But, certainly making sure you’re not extending yourself. You almost never want to be extended going into a recession,” said Marc Agel, a certified financial planner with Albany Advisory Group.
While real GDP growth is down in consecutive quarters, other economic indicators remain strong, including the labor market and nominal GDP.
Lahiri adds that Thursday’s GDP report is also subject to change. As more data becomes available later this summer, a “second” estimate for the second quarter will be released at the end of August. An estimate the professor says could be more favorable than the 0.9% decline.
Experts say other economic policies, including the Federal Reserve’s continued efforts to combat inflation, will have a likely ripple effect on GDP growth in the coming months.