It’s Official: Revised GDP Numbers Show the Economy is Definitely Shrinking

Dadeland Station Shopping Center in Miami, Florida, features retailers such as Target, BestBuy and Michael's. Since the last GDP estimate, a series of high-profile retail companies, including Target, Best Buy and Walmart, have been forced to cut earnings estimates, joined Tuesday by Macy’s and Nordstrom.

By Published on August 25, 2022

The Department of Commerce revised the estimate of Gross Domestic Product (GDP) Thursday morning, finding similarly to July’s estimate that real GDP contracted in the second quarter of 2022.

The revised estimate for the second quarter finds that real GDP decreased annually at a rate of 0.6%, slightly less than the July 28 estimate of a 0.9% decrease, according to the Bureau of Economic Analysis.

This matches the expectations of economist E.J. Antoni, who told the Daily Caller News Foundation in advance of the results that it was unlikely that the revised estimate would significantly change from the July estimate.

One well-known rule of thumb for defining a recession is two consecutive quarters of GDP contraction, a measure that the Biden administration has repeatedly attempted to argue is not necessarily accurate. The White House has typically deferred to the National Bureau of Economic Research to officially declare a recession, with Treasury Secretary Janet Yellen stressing the health of the labor market ahead of the July GDP estimates as an example of why the U.S. is not in a recession.

“We are already in a corporate earnings recession,” Antoni told the DCNF. “Many corporations have only met or beat earnings estimates last quarter because those estimates were revised down from previous quarters.”

Since the last GDP estimate, a series of high-profile retail companies, including Target, Best Buy and Walmart, have been forced to cut earnings estimates, joined Tuesday by Macy’s and Nordstrom. As companies struggle with inventory overflow, some have even turned to storing inventory in truck trailers or parking lots as temporary storage facilities in lieu of potentially expensive investments in more traditional warehouse facilities, the Wall Street Journal reported Wednesday.

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Shipping industry insiders believe that this practice is adding to existing strain on the shipping industry, taking up shipping containers that could otherwise be used to transport goods, according to the WSJ.

“When a trailer is being used for storage, it can’t be used for transporting other goods,” said Miami University professor of supply chain management Lisa Ellram, to the WSJ.

To manage the overflow, companies like Macy’s and Target have cut prices as part of a strategy to reduce inventory, as others take advantage of discount retail stores like Ross or Burlington Coat Factory to effectively offload the inventory crisis, the WSJ reported.

Since the last GDP estimate, the July Consumer Price Index indicated inflation seen by consumers was 8.5% year-on-year in July, remaining historically high despite being below the June peak of 9.1%, according to data from the Bureau of Labor Statistics. The July Producer Price Index was similar, estimating inflation seen by producers was 9.8% year-on-year, down from a peak of 10.3% in June, according to data from the BLS.

 

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