It's (Unofficially) a Recession!

The economy continues to teeter on the edge of a recession. The Atlanta Fed's GDPNow tracking model shows Q2's real GDP growth at -1.0% (saar). It was revised down from 0.3% following this morning's release of May's personal income and consumption data. The model shows real consumer spending up 1.7%, a downward revision from 2.7%. In addition, real gross private domestic investment growth was revised down from -8.1% to -13.2%, led by a 10.1% drop in residential investment. Let’s have a closer look at the recession issue:

(1) Inflation has eroded consumers' purchasing power. Nominal disposable personal income (DPI) is up 2.8% y/y through May, but the PCED inflation rate was 6.3% over this same period. As a result, real DPI has been falling. Many consumers were able to offset the weakness in their real DPI by reducing their personal saving rate over the past year through April to maintain their spending. But that may be harder to do going forward.