The US economy shrank at a 0.6 per cent rate in the second quarter of 2022, a more moderate pace than initially thought but still marking a second straight quarter of negative growth.
While the figure does meet one of the informal signs of a recession, President Joe Biden's administration has fought back against such a notion, pointing to the strong labour market and low unemployment.
Still, inflation is at a four-decade high and the Federal Reserve's aggressive actions to curtail it raise the risk of an eventual recession.
Consumer spending grew at a 1.5 per cent year-on-year pace last quarter, faster than initially estimated but still down from 1.8 per cent from January through March.
Consumer spending, which accounts for nearly 70 per cent of US economic activity, grew at a 1.5 per cent annual pace last quarter, faster than the Department of Commerce initially estimated, but down from 1.8 per cent from January through March.
The Federal Reserve has raised its interest rate four times in 2022 in its effort to curb inflation, making it costlier to take out a mortgage or a loan.
Fed chairman Jerome Powell said the central bank is hoping to achieve a “soft landing” by driving down inflation without plunging the economy into a recession.
But Americans' pessimism in the economy is growing. Consumer confidence in July dipped to its lowest level since February 2021, data from the Consumer Confidence Index showed.
And a Monmouth University poll the same month showed that economic issued remained the largest problem facing American families. Sixty-three per cent of respondents listed inflation, petrol prices, the economy or everyday bills as their biggest concern.
Powell the centre of attention at Jackson Hole Symposium
The title of this year's event at the Federal Reserve Bank of Kansas City’s Economic Policy Symposium in Jackson Hole, Wyoming — which is returning to an in-person format this year — is titled Reassessing Constraints on the Economy and Policy.
Mr Powell's keynote address on Friday morning at the wilderness lodge could provide more information on his hopes to achieve a soft landing.
By raising its rates even as the nation's economy has slowed, the Fed has increased the risk of a downturn.
The Fed could raise interest rates by an additional 50 to 75 basis points when they next meet in September. Mr Powell is unlikely to provide a clue on which direction the Fed will take.
Investors have dropped expectations that the US central bank could shift to a slower pace of rate hikes as inflation remains at 8.5 per cent on an annual basis, but Mr Powell's remarks on Friday will be studied for any signal that a downturn could alter the Fed's strategy.
He is expected to reiterate that the Fed remains strongly committed to take all action necessary in the form of interest rates to curb inflation. He could also confirm that the Fed will keep its interest rates in place into the coming year once it finishes raising them.
“It's all treading water until we get a hold on what Fed chief Powell has to say at Jackson Hole,” John Hardy, Saxo Bank's head of FX strategy, told Reuters.