In the second quarter, GDP fell at an annual rate of 0.9 percent. This was the second consecutive quarter that we saw the economy contract. So, before I discuss how an official recession is determined and whether or not we are in one, I’d like to take a deeper look at the factors that contributed to a shrinking in the economy for the most recent quarter.
Discussing inflation may be getting a little redundant, I know, but it continues to be front and center for both consumers and investors alike. The Labor Department released inflation data for May, which ticked up by 1% for the month and 8.6% over the last year. This is the highest it’s been in roughly 40 years.
Historically speaking, outside of the Great Depression, and after the housing crash of 2008, year-over-year home price declines almost never happen in the United States. But today’s circumstances could lead us into a rare period in which home prices do indeed fall. It’s telling that Powell didn’t close the door on the possibility of home price declines when he said, “We are watching that quite carefully.”