Second Quarterly GDP Decline In a Row

Brian Turner
28 Jul, 2022
New York City

The U.S. economy declined for the second quarter in a row largely on the account of fall in investments and weak government spending.

The GDP shrank at an annual rate of 0.9% following the 1.6% decline in the first quarter, the Bureau of Economic Analysis said Thursday. 

Real GDP decreased less in the second quarter than in the first quarter reflecting an upturn in exports and a smaller decrease in federal government spending that were partly offset by larger declines in private inventory investment and state and local government spending, a slowdown in PCE, and downturns in nonresidential fixed investment and residential fixed investment. 

Imports decelerated. 

The decrease in private inventory investment was led by a decrease in retail trade driven by the weakness in general merchandise stores and lower level of activities at automobile dealers. 

The decrease in residential fixed investment was led by a decrease in brokers' commissions as the home unit sales declined.  

The decrease in federal government spending reflected a decrease in non-defense spending that was partly offset by an increase in defense spending. 

The decrease in non-defense spending reflected the sale of crude oil from the Strategic Petroleum Reserve, which results in a corresponding decrease in consumption expenditures. 

Because the oil sold by the government enters private inventories, there is no direct net effect on GDP. 

The decrease in state and local government spending was led by a decrease in investment in structures. 

The decrease in nonresidential fixed investment reflected decreases in structures and equipment that were mostly offset by an increase in intellectual property products. 

The increase in imports reflected an increase in services (led by travel).

The increase in exports was driven by higher exports of industrial supplies and materials and services led by the rebound of international tourist arrivals. 

The increase in PCE or personal consumption expenditure reflected an increase in services led by food services and accommodations as well as health care, partly offset by a decrease in goods led by food and beverages consumption.