Second-quarter GDP declined less than previously thought, but the economy is still shrinking

Minneapolis(CNN Business) The US economy shrank at a slightly slower rate than estimated during the second quarter, according to updated data released Thursday by the US Bureau of Economic Analysis.

The nation's gross domestic product -- the broadest measure of economic activity -- shrank 0.6% at an annualized rate from April through June. The activity was revised upward from the advanced estimate released in July, which showed a 0.9% decline.

The GDP update, which is based on more comprehensive data, includes slight upward revisions to consumer spending and private inventory investments.

Despite the upward revision, the latest estimates show an economy that has been contracting for two consecutive quarters, a threshold that's generally considered an unofficial indicator of a recession (the official arbiter is a panel of National Bureau of Economic Research economists, who take an array of economic indicators into consideration).

Many economists, however, don't believe the US is in the midst of a recession. They point to the strong labor market and heightened levels of consumer and business spending, production and income. Second-quarter gross domestic income, an alternative economic measure that gauges incomes earned and the costs incurred in the production of all the goods and services, rose 1.4% on an annualized basis.

Separately on Thursday, unemployment filings ticked down from the week before. During the week that ended August 20, there were 243,000 initial jobless claims filed, a decrease of 2,000 from the prior week, which was adjusted downward to 245,000 from 250,000, according to data from the Department of Labor.

"There has been a big disconnect between real GDP and other economic measures in the first half of 2022. Real GDP fell, but employment growth was very strong, real GDI was up solidly, and industrial production increased," said Gus Faucher, chief economist at The PNC Financial Services Group.

Whether it's officially a recession might not matter to the average American. The past several months have been a time of historically high inflation that has not only eaten away at pay gains and savings accounts, but also Americans' optimism about the direction of the economy.

In recent months, the Federal Reserve has undertaken a series of interest rate hikes as part of its efforts to cool off inflation and slow demand. All eyes will be on Fed chair Jerome Powell, who is expected to speak at the central bank's annual Jackson Hole Economic Symposium Friday morning.

Thursday's report is the second of three estimates for quarterly GDP. The third revision, due in September, will be inclusive of additional economic data.

Revisions next month will likely show that GDP was not nearly as soft in the first half of the year as initially reported, Faucher said.

"That being said, economic growth is slowing and recession risks are elevated," he said in a statement. "PNC's baseline forecast is for much weaker growth over the next couple of years and slowing inflation, but no recession. But the probability of recession is around 45%."