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U.S. Economy Weaker Than Thought in Yr’s First Half, by One Measure


A key measure of U.S. economic output grew more slowly in the primary half of the yr than previously believed, government data released Thursday showed.

Gross domestic income, adjusted for inflation, grew at a 0.8 percent annual rate in the primary quarter of the yr and barely grew in any respect — at only a 0.1 percent rate — within the second, the Commerce Department said Thursday. That was sharply weaker than the 1.8 percent and 1.4 percent growth rates reported in earlier estimates.

Inflation F.A.Q.

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What’s inflation? Inflation is a loss of buying power over time, meaning your dollar is not going to go as far tomorrow because it did today. It is usually expressed because the annual change in prices for on a regular basis goods and services comparable to food, furniture, apparel, transportation and toys.

What causes inflation? It could actually be the results of rising consumer demand. But inflation may also rise and fall based on developments which have little to do with economic conditions, comparable to limited oil production and provide chain problems.

Is inflation bad? It relies on the circumstances. Fast price increases spell trouble, but moderate price gains can result in higher wages and job growth.

Can inflation affect the stock market? Rapid inflation typically spells trouble for stocks. Financial assets generally have historically fared badly during inflation booms, while tangible assets like houses have held their value higher.

Gross domestic product, a better-known measure of inflation-adjusted output, shrank during each periods, at a 1.6 percent rate in the primary quarter and a 0.6 percent rate within the second. Those figures were unchanged from earlier estimates.

Taken together, the 2 measures suggest economic growth was at best anemic in the primary half of the yr. At worst, the economy had been shrinking for 2 consecutive quarters, a typical, though unofficial, definition of a recession. A mean of the 2 measures, which some economists consider more reliable than either individual figure, shows that output shrank barely in the primary half of the yr.

The conflicting signals sent by the 2 measures of output in recent quarters had been something of an economic mystery because, in theory, the 2 indicators ought to be an identical. G.D.P. measures the worth of all the products and services produced and sold within the country; the lesser-known gross domestic income measures all the cash earned by individuals, businesses and other organizations. Because one person’s spending is another person’s income, the 2 figures should add as much as the identical amount.

In practice, the 2 measures rarely align perfectly because they’re derived from different data sources. Recently, nevertheless, they diverged sharply, which government statisticians attributed partly to the large shifts in economic activity attributable to the pandemic, in addition to difficulty accounting for the massive aid programs enacted to combat it. Before the most recent revisions, government data showed gross domestic income as $773 billion larger than gross domestic product within the second quarter of this yr, a spot of nearly 4 percent.

The updated data released Thursday helped narrow the gap to 1.3 percent. Gross domestic income was revised downward each last yr and this yr, mostly because staff’ earnings grew lower than previously believed. Gross domestic product was revised upward in 2020 and 2021, mostly due to stronger consumer spending, especially on services, in addition to increased exports.

Those upward revisions to G.D.P. years mean that the recovery, taken as a complete, looks stronger than earlier figures suggested. They indicate that G.D.P. returned to its prepandemic growth path at the top of last yr, a remarkably rapid recovery from the deep pandemic recession.

More recently, nevertheless, the fastest inflation in a long time has knocked the wind out of the economy’s sails. Within the third quarter, which ends on Friday, most forecasters imagine G.D.P. has grown, but only barely. A forecasting model from the Federal Reserve Bank of Atlanta, which has not yet been updated to reflect the revised data, estimates that G.D.P. grew at only a 0.3 percent rate within the third quarter.

The revisions are a part of an annual process during which the federal government incorporates more complete data from the Internal Revenue Service, state unemployment insurance systems and other sources that aren’t available in time for the Commerce Department’s quarterly estimates. The updates affect data going back five years, although the changes to earlier years were mostly small.

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