- U.S. gross domestic product contracts 0.9% on an annualized basis in the second quarter, following a 1.6% decline in the first three months of the year
- Two consecutive quarters of negative GDP growth is informally called a technical recession, but the government has a broader and more comprehensive definition
- The deteriorating economic outlook may lead Federal Reserve officials to adopt a more dovish stance in the coming months to avoid a significant downturn
Most Read: Fed Raises Rates by 75 Basis Points at July FOMC Meeting in Fight to Quell Inflation [1]
Updated at 9:20 a.m. ET
MARKET REACTION
U.S. equity futures whiplashed, but remained in negative territory after the U.S. GDP report was released. Meanwhile, Treasury yields declined across the curve on bets that rapidly weakening economic activity will promp the Fed to embrace a less aggressive hiking cycle. Elsewhere, the U.S. dollar[2] (DXY) trimmed its advance, but held onto some of its early morning gains.
Rising risks of an economic downturn will likely lead to a central bank policy pivot later this year, provided inflation begins to cool meaningfully in the coming months. Against this backdrop, the U.S. dollar will have difficulties to make fresh highs in the near-term, signaling it may have peaked in July.
U.S. TREASURY YIELDS, S&P 500[3] FUTURES AND DXY CHART
Source: TradingView
Original post at 8:50 a.m. ET
The U.S. economy failed to rebound and posted another contraction in the second quarter due to a rapid cooling of household consumption and steep drop in investment, a sign that the outlook continues to deteriorate amid mounting headwinds, including four-decade high inflation, and tightening financial conditions. According to the Commerce Department, gross domestic product, the broadest measure of goods and services produced
