Live News Update: Sri Lankan capital’s consumer prices reach hyper-inflationary levels

Live News Update: Sri Lankan capital’s consumer prices reach hyper-inflationary levels

Several economists took a stab at their second-quarter GDP forecasts after a disappointing consumer spending report raised concerns about a slowing U.S. economy.

Some forecasters even think that the world’s largest economy will decline for the second consecutive quarter, crossing the threshold of a technical recession.

Personal consumption increased in May by 0.2 percent, the Ministry of Trade announced published on Thursday, missing economists’ expectations for a 0.4 percent increase. That represented a decline from a downwardly revised 0.6 percent increase in April, indicating that spending was weaker in those months than previously thought.

A revision of the first-quarter GDP report on Wednesday showed that personal spending rose just 1.8 percent in the first three months of the year, compared with a previous report of a 3.1 percent increase.

Weaker real spending data in the spring and upward revisions to first-quarter inventories in the GDP report prompted Goldman Sachs to cut its second-quarter GDP estimate by 1 percentage point to just 1.9 percent growth. Personal spending is now forecast to grow just 1.6 percent in the second quarter, down from previous estimates of 2.3 percent.

Capital Economics now estimates that spending will grow just 0.8 percent annually in the second quarter, compared with a previous forecast of almost 3 percent. Its GDP forecast was cut to 1 percent annually, down from previous estimates of 2.7 percent.

Similarly, the Federal Reserve Bank of Atlanta’s GDPNow tracker now points to a 1 percent contraction in GDP in the June quarter.

Pantheon Economics has cut its GDP estimate and now forecasts a 0.5 percent contraction in the second quarter.

“All the decline will be in inventory numbers,” said chief economist Ian Shepherdson. He expects domestic final demand to grow by just 1.5 percent in the second quarter, compared with 3 percent in the first three months of this year.

“The markets and the media will call two-quarters of the GDP decline a recession, but [National Bureau of Economic Research] they won’t because payrolls have continued to grow strongly,” Shepherdson said, referring to the research organization that determines whether the economy has officially entered a recession.



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