Fall is arriving with two consecutive quarterly readings of negative real  GDP growth: the −1.6 percent final estimate for Q1 2022 and −0.9 percent first estimate for Q2 2022.1  I note that gross output, which consists  of activity across the economy’s full supply chain, rose 2.0 percent in the  first quarter, the latest reading available and the weakest growth since  Q2 2020. As with GDP, most of the output gain came from the services  sector.2  The shrinking GDP has been accompanied by raging inflation  and tight labor markets, not to mention continuing energy uncertainties stemming from the Russo-Ukrainian War as well as the lingering  effects of the COVID-19 pandemic.

Federal Reserve (Fed) Chair Jerome Powell and the Federal Open  Market Committee (FOMC) are once again center stage as the world waits  to see what the next interest rate increase will bring and whether the US  economy will be declared to be in a recession. The FOMC’s increase of its  benchmark interest rate by 150 basis points since June and the promise  of more increases seem to be effective, as preliminary readings indicate  the economy is slowing. This is particularly visible in housing markets  and construction activity, two interest-rate sensitive economic sectors.3 Just how much slowdown America will see is the larger question.