Finance

Has the U.S. economy been shrinking? New data will shed light.

Government data on Thursday will help answer a seemingly simple but surprisingly thorny question: Did the U.S. economy shrink in the second quarter?

The Commerce Department’s initial reading showed that gross domestic product, adjusted for inflation, fell 0.2 percent (an annual rate of 0.9 percent) in the quarter. It was the second straight contraction, fanning fears that the economy was entering a recession, or perhaps that one had already begun.

On Thursday, the government will release revised figures based on more complete data. Forecasters expect the new data to show that G.D.P. shrank by a bit less than previously calculated. (The numbers will be revised again next month.)

But another number in the report is arguably more important: the government’s first estimate for gross domestic income in the second quarter.

Gross domestic income is gross domestic product’s less-famous twin. In theory, the two indicators measure the same thing, economic output, from opposite sides of the ledger: One person’s spending is someone else’s income.

In practice, though, the two indicators can diverge because the government can’t measure the economy perfectly. And recently, they have diverged considerably. In the first quarter, gross domestic product fell, while gross domestic income rose.

The divergence matters because both numbers can’t be right — and some economists believe the figure on income is likely to be closer to the mark, because the government collects more detailed data on income. If they are right, and if the income numbers continue to look stronger, it would suggest that the economy kept growing in the first half of the year. That would ease concerns about a recession.

Back to top button