It might not be an official recession just yet, but the US economy contracted for the second consecutive quarter.On Thursday, the Commerce Department reported that US gross domestic product fell by 0.9% in the second quarter.The report says that the decrease in real GDP reflected decreases in private inventory investment, residential fixed investment, federal government spending, state and local government spending, and nonresidential fixed investment that were partly offset by increases in exports and personal consumption expenditures (PCE).An economic slowdown is attributed to a 1.6% decline in US GDP in the first quarter.Usually, a recession is officially announced by the National Bureau of Economic Research (NBER). This occurs after months of research and debate. However, the main criterion for a recession is the contraction of the economy for two consecutive quarters.
Analysts say the US recession will be favourable for gold and all precious metals, as the Federal Reserve will have to slow the pace of rate hikes at a time when inflation remains stubbornly high.
However, not all economists expect the Federal Reserve to soften its aggressive stance on rate hikes.Andrew Hunter, a senior US economist at Capital Economics, believes that inflation is still a serious problem that the US central bank needs to tackle.According to market analysts, the report showed that inflation had a significant impact on economic growth. The report also noted that personal consumption continues to fall, increasing 1.1% in the second quarter, down from 1.8% from the first quarter.The report also showed that US trade is starting to rebound. Exports increased 18% in the second quarter, while imports increased 3.1%.However, rising interest rates are impacting investment spending, especially from consumers. The report said that home investments dropped 14% in the second quarter, down from a 0.4% rise in Q1.On the business side, investment in equipment fell 2.7%.
