President Biden cheered the report in a statement Thursday morning. “For months, doomsayers have been arguing that the U.S. economy is in a recession, and congressional Republicans have been rooting for a downturn,” he said. “But today we got further evidence that our economic recovery is continuing to power forward.”

By one common definition, the U.S. economy entered a recession when it experienced two straight quarters of shrinking G.D.P. at the start of the year. Officially, however, recessions are determined by a group of researchers at the National Bureau of Economic Research, who look at a broader array of indicators, including employment, income and spending.

Most analysts don’t believe the economy meets that more formal definition, and the third-quarter numbers — which slightly exceeded forecasters’ expectations — provided further evidence that a recession had not yet begun.

But the overall G.D.P. figures were skewed by the international trade component, which often exhibits big swings from one period to the next. Economists tend to focus on less volatile components, which have showed the recovery steadily losing momentum as the year has progressed. One closely watched measure suggested that private-sector demand stalled out almost completely in the third quarter.

Mortgage rates passed 7 percent on Thursday, their highest level since 2002.

“Housing is just the single largest trigger to additional spending, and it’s not there anymore; it’s going in reverse,” said Diane Swonk, chief economist at the accounting firm KPMG. “This has been a stunning turnaround in housing, and when things start to go really quickly, you start to wonder, what are the knock-on effects, what are the spillover effects?”

The third quarter was in some sense a mirror image of the first quarter, when G.D.P. shrank but consumer spending was strong. In both cases, the swings were driven by international trade. Imports, which don’t count toward domestic production figures, soared early this year as the strong economic recovery led Americans to buy more goods from overseas. Exports slumped as the rest of the world recovered more slowly from the pandemic.

Both trends have begun to reverse as American consumers have shifted more of their spending toward services and away from imported goods, and as foreign demand for American-made goods has recovered. Supply-chain disruptions have added to the volatility, leading to big swings in the data from quarter to quarter.

Few economists expect the strong trade figures from the third quarter to continue, especially because the strong dollar will make American goods less attractive overseas.

Jim Tankersley contributed reporting.

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How the Car Market Is Shedding Light on a Key Inflation Question

In a recent speech pointedly titled “Bringing Inflation Down,” Lael Brainard, the Federal Reserve’s vice chair, zoomed in on the automobile market as a real-world example of a major uncertainty looming over the outlook for price increases: What will happen next with corporate profits.

Many companies have been able to raise prices beyond their own increasing costs over the past two years, swelling their profitability but also exacerbating inflation. That is especially true in the car market. While dealerships are paying manufacturers more for inventory, they have been charging customers even higher prices, sending their profits toward record highs.

Dealers could pull that off because demand has been strong and, amid disruptions in the supply of parts, there are too few trucks and sedans to go around. But — in line with its desire for the economy as a whole — the Fed is hoping both sides of that equation could be on the cusp of changing.

data, and several industry experts said they didn’t see a return to normal levels of output for years as supply problems continue. Prices are still increasing swiftly, and dealer profits remain sharply elevated with little sign of cracking.

Ford Motor said on Monday that it would spend $1 billion more on parts than it was planning to in the third quarter because some components had become more expensive and harder to find.

By contrast, the supply of used cars has rebounded after plunging in the pandemic, and prices have begun to depreciate at a wholesale level, where dealers buy their stock. But, so far, those dealers aren’t really passing those savings along to consumers. The price of a typical used car has stabilized around $28,000, up 9 percent from a year ago, based on Cox Automotive data. Official used-car inflation data is easing, but only slightly.

Why consumer used-car prices — and dealer profits — are taking time to moderate is something of a mystery. Jonathan Smoke, chief economist at Cox Automotive, said dealers might be basing their prices on what they paid earlier in the year, when costs were higher, for the cars sitting on their lots.

“Dealers are feeling it,” Mr. Smoke said of the price moderation. “But because they price their vehicles based on what they pay for them, the consumer isn’t seeing the price discounts yet.”

Some early instances of discounting are showing up. At the Buick and GMC dealership that Beth Weaver runs in Erie, Pa., demand for used cars has begun to slow down, and the business has sold a few vehicles at a loss.

rolling lockdowns in China.

The Fed could raise rates so much that it snuffs out demand, but given how much pent-up car-buying appetite exists, Mr. Murphy thinks it would take a lot.

“You probably would have to go farther on rates than they have so far, or even than they are expected to go,” he said. “There may be a point at which you have enough pain that you see a pause on demand.”

If demand continues to outstrip new-car supply and dealers continue to reap big profits, that could limit how quickly inflation will ease. If the mismatch is large enough for sellers to keep pushing up prices without losing customers, it could even continue to fuel inflation.

While the car market is just one industry, the uncertainty of its return to normal holds a few lessons for the Fed. For one thing, new-car production makes it clear that supply chain disruptions are improving but not gone.

More hopefully, the car industry could offer evidence that the laws of economics are likely to reassert themselves eventually. Used-car prices have at least stopped their ascent as inventory has grown, and experts say discounting is likely around the corner. If that happens, it could be evidence that companies won’t be able to keep prices and profits high indefinitely once supply catches up with demand.

But cars reinforce the prospect that the readjustment period could last a while.

Automakers are flirting with the idea of keeping production lower so there are fewer cars in the market and price cuts are less common. Mr. Smoke is skeptical that they will hold that line once it means ceding market share to competitors — but the process could take months or years.

“I’m hesitant to say that we won’t have discounting again,” Mr. Smoke said. “But it’s going to take a while to get back to that world.”

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Why Totino’s Needs 25 Ways to Make Pizza Rolls

It takes about 21 ingredients to make a Totino’s pizza roll, the bite-size snack that soared in popularity during the pandemic as people sought easy-to-make meals.

And on any given day since last winter, at least one of those ingredients, if not many, has either been difficult to find or insanely expensive.

The shortages became so bad at one point that General Mills, which makes Totino’s, simply couldn’t produce enough.

sugar and low-calorie sweeteners like erythritol, which is used in products like yogurt and cereal, were tough to pin down. Then palm oil, an odorless and tasteless oil that’s in about half the packaged goods in supermarkets, became hard to find. After Russia invaded Ukraine, global supplies of sunflower oil, produced by both countries, disappeared. And more recently, because of the avian flu that swept across the United States this spring, egg prices soared, leading to shortages.

guidance to allow manufacturers to make “minor formulation changes” because of supply disruptions or shortages without updating the ingredient list.

The leeway doesn’t apply to a change that increases the safety risk because it contains a food allergen or gluten, or that replaces a key ingredient or one featured in the name or marketing. For example, a product that claims to be made with “real butter” cannot now be made with margarine, and raisin bread must contain raisins.

Before the pandemic, Ingredion, a company that makes sweeteners, starches and other ingredients used by large food companies, often had its 500 scientists and 26 labs all over the country working on new products for companies. But in recent months, much more of their time has been spent figuring out what happens to the taste, texture and shelf life of a food when one or two ingredients are switched out.

“The overall reformulation of a product is a very complicated equation,” said Beth Tormey, a vice president and general manager of systems and ingredient solutions at Ingredion. “It has to meet parameters of texture and taste so that consumers like it, but it also has to fit into the regulatory box and the nutrition box. It all sounds simple from a distance, but it’s not.”

Take eggs. They are, explained Leaslie Carr, a senior director at Ingredion, a key source of protein for many products, but they are more than that. For baked goods, for instance, they provide moisture and volume, helping make cakes light and fluffy.

“Salad dressings also use a lot of egg for body and texture,” Ms. Carr said. “So we’re trying to figure out how to use different emulsifiers to reduce the amount of egg used, maybe reduce the egg amount by half, to produce the dressings. That gives you some flexibility to continue to manufacture the product until the egg situation stabilizes.”

General Mills started to notice the supply chain disruptions late last year.

The company’s plant in Wellston, Ohio, which had churned out Totino’s pizza and pizza rolls, working to meet the surge in sales that accompanied the pandemic, suddenly couldn’t get key ingredients.

“First it was the starch that we use for the cheeses,” Mr. Nudi said. “Then certain packaging and oils were hard to find. A lot of the materials that we use for Totino’s were challenged from an ingredient standpoint.”

By February, there weren’t enough Totino’s pizza and pizza rolls to keep grocery freezer sections full.

By then, the company had started daily meetings across its research and development, procurement and supply chain departments to figure out how to revamp and substitute ingredients. For instance when starch became difficult to find, the company began substituting and combining different starches in order to figure out what worked to make the pizza rolls look and taste the same.

In March, the company had filled freezer sections again, Mr. Nudi said.

But the lessons being learned from the “new normal” in the supply chain are being felt across the entire company.

Before the pandemic, the packaged food industry was a stable environment, with a consistent level of growth, Mr. Nudi said. That made having a secure, steady supply of ingredients easier.

Now General Mills is lining up multiple suppliers for each ingredient and keeping more ingredients on hand.

“Just-in-time deliveries don’t work anymore,” Mr. Nudi said. “We’re adding to inventory, holding more dry ingredients and fats and oils, even though that’s tough too right now. We need tanks to store those liquids, and those just aren’t readily available.”

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Retailers Stumble Adjusting to More Selective Shoppers

This hasn’t been the year retailers planned for.

After two years of navigating the pandemic — which brought record online sales and shoppers willing to buy all manners of items, to the point that the global supply chain became strained — executives knew a new normal would take shape.

Sales might slow, the thinking went, but people would still want TVs, fashionable dresses and throw pillows. So, with supply chain issues in mind, companies stocked up. But this spring it became clear that those items weren’t selling quickly enough. As people watched the prices of food and gas rise, their spending became more selective, leaving retailers with shelves of inventory they couldn’t get rid of.

The magnitude of the miscalculation was crystallized this week in a batch of quarterly earnings from major retailers like Walmart and Target, which showed a mix of declining sales of discretionary goods and lower profits. A number revised their guidance, lowering expectations for both sales and profits for the rest of the year. A glut of inventory weighed on companies’ balance sheets: Inventory at Walmart rose 25 percent from this time last year. At Target, it increased 36 percent. And Kohl’s said inventory was up 48 percent.

loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.

“The last two years was great for retailers because consumers were buying everything they had to offer,” Liza Amlani, founder of Retail Strategy Group, which works with brands on their merchandising and planning strategies. “They just can’t do that anymore. You have to understand what the consumer wants more now than ever.”

In July, U.S. retail sales were virtually unchanged, according to data from the Commerce Department released Wednesday. Excluding the sales of gas and cars, retail sales actually increased 0.7 percent. But 85 percent of U.S. consumers said that inflation is altering the way they shop, according to a survey released this week from Morning Consult.

Most retailers are hoping this pullback period is only temporary. In the meantime, companies are trying to signal to customers that it’s worth doing what spending they do in their stores. Kohl’s, for instance, said that its private-label brands outperformed the national ones it carries last quarter, and that shoppers gravitated toward buying more basic apparel that could be worn with many different outfits.

Retailers are also turning to the familiar strategy of discounting merchandise to entice shoppers to open their wallets. It’s one they didn’t have to deploy for most of the pandemic, when people showed they were willing to pay full price for a wide range of items. Target, Walmart and Ross Stores all said they have marked down goods in recent weeks. In turn, retailers like BJ’s Wholesale Club — even if they were content with their balance sheets — said they lowered prices on some categories in order to stay competitive. Robert Eddy, chief executive at BJ’s Wholesale Club, even said that the company was willing to “alter the scope and the depth of those promotions” for the holiday season.

The strategy of discounting might not actually get to the root cause, analysts say.

“There is a point at which lower prices don’t trigger incremental demand because the consumers already have it,” said Simeon Siegel, a managing director at BMO Capital Markets. “It’s not an indication that the company is dead. It’s not an indication that they’re never going to buy it again. They just need the time lag.”

Retailers need to realize that consumers are thinking differently, Mr. Siegel said. Some big-ticket purchases — like an exercise bike, living room couch or patio grill — will happen just once. In other cases, the amount of time between purchasing and replenishing will be longer. A person might now buy a candle every few months, compared to doing it every month in the early stages of the pandemic when they were home more often. And more people are choosing to spend their money on things like air travel and movie tickets this summer compared to last.

With all of these variables, lowering prices might not trigger the demand a retailer wants, Mr. Siegel said. It might simply just cut into a company’s profits.

For the stores that did see sales growth, like the big-box retailers Walmart and Target, most of that volume was attributed to higher food prices. Groceries have narrower margins than, say, a retailer’s private-label dress brand, and the shift in sales from one category to another affects the company’s overall profitability.

Along with pricing, retailers need to figure out how to deal with their inventory issues, especially with the all-important holiday season just a few months away.

“Getting through the inventory levels allows them to have a cleaner store, a cleaner supply chain,” said Bobby Griffin, equity research analyst at Raymond James. “They won’t be able to predict it perfectly, but getting through excess inventory will give them more flexibility to try to adapt to what the holiday is throwing at them.”

For all the challenges, some retailers saw a brighter path ahead. While inventory at TJX, the owner of the T.J. Maxx and Marshall’s chains, was up 39 percent for the quarter, the company said it was comfortable at that level because they had what shoppers actually wanted.

“They’re looking for an exciting treasure hunt, an entertaining shopping experience in stores,” Ernie Herrman, TJX’s chief executive, said in a call with analysts, “and along with that value equation, we continue to provide those two things.”

Isabella Simonetti contributed reporting.

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CEOs Are Obsessed With ‘Elasticity’ as Inflation Soars. Here’s Why.

When companies raise prices, they make assumptions about the strength of their brands and how inflation affects their typical customers — earnings at the mass-market retailer Target have plunged because its shoppers have been buying less clothing and electronics, while the luxury house Hermès, maker of the pricey Birkin bag, recently reported its biggest profit margin ever.

Fittingly, the number of mentions of elasticity on the earnings calls mimics the inflation rate: bumping along at a relatively low level of about 2 percent for years before soaring to new heights in recent months, above 9 percent in June.

Several companies say they have already noticed higher prices hurting demand, at least for some of their products. That has been true for Kellogg, which saw cereal sales in Europe slow; Tyson Foods, the largest U.S. meat processor by sales, which said customers were shifting away from more expensive chicken and meat offerings in favor of cheaper cuts; and Ralph Lauren, which said it had seen some of its “value-oriented” customers pulling back.

Walmart

“The rising cost for essential items and customers’ reprioritization of spending led to significant mix shifts in our business.”
— John David Rainey, chief financial officer

Southwest Airlines

“Leisure travelers have a price elasticity effect where you can’t go much higher.”
— Andrew M. Watterson, chief commercial officer

Procter & Gamble

“As they are more exposed to inflation broadly in the marketplace, with the highest inflation in 40 years, it’d be naïve to assume the consumer is not looking at their cash outlay and their spending even in our categories.”
— Andre Schulten, chief financial officer

And a few companies have raised alarms about inflation already leading to broad-based weakness in demand.

HanesBrands

“I think you’re seeing a macro environment change in the second quarter, and particularly towards the middle to end of the quarter, with the inflation really hitting the consumer, and you saw an inflection point in the consumer behavior.”
— Stephen B. Bratspies, chief executive

Crocs

“We anticipate, as the drag of high interest rates, high inflation and uncertainty continues to impact the consumer, that they will soften as the year goes on.”
— Andrew Rees, chief executive

Sweetgreen

“In Sweetgreen’s 15-year history of sales patterns, we’ve never seen this before. Our historical seasonality always showed growth during this period.”
— Mitch Reback, chief financial officer

The growing chatter about elasticity suggests that the point at which higher prices could force broader consumer cutbacks is approaching.

“In the first half of the year, we saw minimal price elasticity across our portfolio,” Michele Buck, the chief executive of Hershey, told investors. “We continue to expect more elasticity in the second half of the year than what we have experienced year to date.”

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How This Economic Moment Rewrites the Rules

Indeed, the Federal Reserve is trying to cut it off. Jerome H. Powell, the Fed chair, has described the labor market, with twice as many open jobs as unemployed workers, as “unsustainably hot,” and is trying to cool it through aggressive interest rate increases. He and his colleagues have argued repeatedly that a more normal economy — less like a boomtown, with lower inflation — will be better for workers in the long term.

“We all want to get back to the kind of labor market we had before the pandemic, where differences between racial and gender differences and that kind of thing were at historic minimums, where participation was high, where inflation was low,” Mr. Powell said last month. “We want to get back to that. But that’s not happening. That’s not going to happen without restoring price stability.”

Mr. Biden and his advisers, too, have argued that a cooling economy is inevitable and even necessary as the country resets from its reopening-fueled surge. In an opinion article in The Wall Street Journal in May, Mr. Biden warned that monthly job growth was likely to slow, to around 150,000 a month from more than 500,000, in “a sign that we are successfully moving into the next phase of the recovery.”

So far, that transition has been elusive. Forecasters had expected hiring to slow in July, to a gain of about 250,000 jobs. Instead, the figure was above 500,000, the highest in five months, the Labor Department reported on Friday. But the labor force — the number of people who are either working or actively looking for work — shrank and remains stubbornly below its prepandemic level, a sign that the supply constraints that have contributed to high inflation won’t abate quickly.

Ms. Sinclair said it shouldn’t be surprising that it was taking time to readjust after the coronavirus disrupted nearly every aspect of life and work. As of July, the U.S. economy, in the aggregate, had recovered all the jobs lost during the early weeks of the pandemic. But beneath the surface, the situation looks drastically different from what it was in February 2020. There are nearly half a million more warehouse workers today, and nearly 90,000 fewer child care workers. Millions of people are still working remotely. Others have changed careers, started businesses or stopped working.

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As Inventory Piles Up, Liquidation Warehouses Are Busy

PITTSTON, Pa. — Once upon a time, when parents were scrambling to occupy their children during pandemic lockdowns, bicycles were hard to find. But today, in a giant warehouse in northeastern Pennsylvania, there are shiny new Huffys and Schwinns available at big discounts.

The same goes for patio furniture, garden hoses and portable pizza ovens. There are home spas, Rachael Ray’s nonstick pans and a backyard firepit, which promises to make “memories every day.”

The warehouse is run by Liquidity Services, a company that collects surplus and returned goods from major retailers like Target and Amazon and resells them, often for cents on the dollar. The facility opened last November and is operating at exceptionally high volumes for this time of year.

last month, some major retailers say shoppers are buying less clothing, gardening equipment and electronics and focusing instead on basics like food and gas.

Adding to that glut are all the things people bought during the pandemic — often online — and then returned. In 2021, shoppers returned an average of 16.6 percent of their purchases, up from 10.6 percent in 2020 and more than double the rate in 2019, according to an analysis by the National Retail Federation, a trade group, and Appriss Retail, a software and analytics firm.

Last year’s returns, which retailers are not always able to resell themselves, totaled $761 billion in lost sales. That, the retail federation noted, is more than the annual budget for the U.S. Department of Defense.

rising consumer prices and declining spending, the American economy is showing clear signs of slowing down, fueling concerns about a potential recession. Here are other eight measures signaling trouble ahead:

“You would think that there would be enough data and enough history to see that a little more clearly,” he added. “But it also suggests that times are changing and they are changing fast and more dramatically.”

Strong consumer spending may have saved the economy from ruin during the pandemic, but it has also led to enormous excess and waste.

Retailers have begun to slash prices on inventory in their stores and online. Last Monday, Walmart issued the industry’s latest warning when it said that its operating profits would drop sharply this year as it cut prices on an oversupply of general merchandise.

above a reclaimed strip mine dating back to when this region was a major coal producer. Today, the local economy is home to dozens of e-commerce warehouses that cover the hilly landscape like giant spaceships, funneling goods to the population centers in and around New York and Philadelphia.

Liquidity Services, a publicly traded company founded in 1999, decided to open its new facility as close as it could to the Scranton area’s major e-commerce warehouses, making it easy for retailers to dispense with their unwanted and returned items.

Even before the inventory glut appeared this spring, returns had been a major problem for retailers. The huge surge in e-commerce sales during the pandemic — increasing more than 40 percent in 2020 from the previous year — has only added to it.

The National Retail Federation and Appriss Retail calculate that more than 10 percent of returns last year involved fraud, including people wearing clothing and then sending it back or stealing goods from stores and returning them with fake receipts. But more fundamentally, industry analysts say the increasing returns reflect consumer expectations that everything can be taken back.

burned in incinerators that generate electricity.

stock price plummeted nearly 25 percent in one day. Other retailers’ share prices have also fallen.

Target’s stumbles have been an opportunity for people like Walter Crowley.

Mr. Crowley regularly rents a U-Haul and drives back and forth to the liquidation warehouse from his home near Binghamton, N.Y.

Mr. Crowley, who turns 54 next month, focuses mostly on discounted home improvement goods, which he resells to local contractors, like multiple pallets of discontinued garage door openers, tiles and flooring.

But on a sweltering day earlier this month, he stood outside the warehouse in his U-Haul loading up on items from Target.

“I saw its stock got tanked,” said Mr. Crowley, a cigarette dangling from his mouth and sweat pouring down his face. “It’s an ugly situation for them.”

He bought several cribs, a set of sheets for his own house and a pink castle for a girl in his neighborhood who just turned 5.

“I end up giving a lot of it away to my neighbors, to be honest,” he said. “Some people are barely getting by.”

The buyers bid for the goods through online auctions and then drive to the warehouse to pick up their winnings.

It’s a diverse group. There was a science teacher who stocked up on plastic parts for his class, as well as a woman who planned to resell her purchases — neon green Igloo coolers, a table saw, baby pajamas — in the Haitian and Jamaican communities of New York. She ships other items to Trinidad.

The Pennsylvania warehouse, one of eight that Liquidity Service operates around the country, employs about 20 workers, some of whom have been hired on a temporary basis. The starting pay is $17.50 an hour.

Charles Benincasa, 39, is a temporary worker who has had numerous “warehousing” jobs, the most recent at the Chewy pet food distribution center in nearby Wilkes-Barre.

Mr. Benincasa said his friends and family had gotten in the habit of returning many of the goods they buy online. But as he’s watched the boxes pile up in the Liquidity Services warehouse, he worries about the implications for the economy.

“Companies are losing a lot of money,” he said. “There is no free lunch.”

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U.S. Economy Shows Another Decline, Fanning Recession Fears

A key measure of economic output fell for the second straight quarter, raising fears that the United States could be entering a recession — or perhaps that one had already begun.

Gross domestic product, adjusted for inflation, fell 0.2 percent in the second quarter, the Commerce Department said Thursday. That drop followed a decline of 0.4 percent in the first quarter. The estimates for both periods will be revised in coming months as government statisticians get more complete data.

News of the back-to-back contractions heightened a debate in Washington over whether a recession had begun and, if so, whether President Biden was to blame. Economists largely say that conditions do not meet the formal definition of a recession but that the risks of one are rising.

a bid to tame inflation, and the White House has argued that the slowdown is part of an inevitable and necessary transition to sustainable growth after last year’s rapid recovery.

“Coming off of last year’s historic economic growth — and regaining all the private-sector jobs lost during the pandemic crisis — it’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation,” Mr. Biden said in a statement issued after the release of the G.D.P. report. “But even as we face historic global challenges, we are on the right path, and we will come through this transition stronger and more secure.”

rising consumer prices and declining spending, the American economy is showing clear signs of slowing down, fueling concerns about a potential recession. Here are other eight measures signaling trouble ahead:

“When you’re skating on thin ice, you wonder about what it would take to push you through, and we’re on thin ice right now,” said Diane Swonk, the chief economist for KPMG.

Matthew Martin, 32, is paying more for the butter and eggs that go into the intricately decorated sugar cookies he sells as part of a home business. At the same time, his sales are falling.

“I guess people don’t have as much money to toss at cookies right now,” he said.

Mr. Martin, a single father of two, is trying to cut back on spending, but it isn’t easy. He has replaced trips to the movies with day hikes, but that means spending more on gas. He is hoping to sell his house and move into a less expensive place, but finding a house he can afford to buy has proved difficult, especially as mortgage rates have risen. He has thought about finding a conventional 9-to-5 job to pay the bills, but he would then need to pay for child care for his 4-year-old twins.

“Honestly, I’m not 100 percent sure what I’m going to do,” he said.

defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months,” and it bases its decisions on a variety of indicators — usually only months after the fact.

Some forecasters believe a recession can be avoided, if inflation cools enough that the Fed can slow interest rate increases before they take too much of a toll on hiring and spending.

The economy still has important areas of strength. Job growth has remained robust, and, despite a recent uptick in filings for unemployment insurance, there is little sign of a broad increase in job losses.

Households, in the aggregate, are sitting on trillions of dollars in savings built up earlier in the pandemic, which could allow them to weather higher prices and interest rates.

“What drives the U.S. consumer is the healthy labor market, and we should really focus on job growth to capture the turning point in this business cycle,” said Blerina Uruci, an economist at T. Rowe Price. The Labor Department will release data on July’s hiring and unemployment next week.

The lingering effects of the pandemic are making the economy’s signals harder to interpret. Americans bought fewer cars, couches and other goods in the second quarter, but forecasters had long expected spending on goods to fall as consumers shifted back toward prepandemic spending patterns. Indeed, economists argue that a pullback in spending on goods is needed to relieve pressure on overstretched supply chains.

At the same time, spending on services accelerated. That could be a sign of consumers’ resilience in the face of soaring airfares and rental car rates. Or it could merely reflect a temporary willingness to put up with high prices, which will fade along with the summer sun.

“There is going to be this element of, ‘We haven’t had a summer vacation in three years, so we’re just going to take one, no matter how much it costs,’” said Aditya Bhave, a senior economist for Bank of America. “The question is what happens after the summer.”

Avital Ungar is trying to interpret the conflicting signals in real time. Ms. Ungar operates a small business running food tours for tourists and corporate groups in San Francisco, Los Angeles and New York.

When restaurants closed and travel stopped early in the pandemic, Ms. Ungar had no revenue. She made it through by offering virtual happy hours and online cooking classes. When in-person tours came back, business was uneven, shifting with each new coronavirus variant. Ms. Ungar said demand remained hard to predict as prices rise and the economy slows.

“We’re in two different types of uncertainty,” she said. “There was the pandemic uncertainty, and then there’s the economic uncertainty right now.”

In response, Ms. Ungar has shifted her focus to higher-end tours, which she believes will hold up better than those aimed at more price-sensitive customers. And she is trying to avoid long-term commitments that could be difficult to get out of if demand cools.

“Every annual plan I’ve done in the past three years has not happened that way,” she said. “It’s really important to recognize that what worked yesterday isn’t going to work tomorrow.”

Lydia DePillis contributed reporting.

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Fed Prepares Another Rate Increase as Wall Street Wonders What’s Next

Federal Reserve officials are set to make a second abnormally large interest rate increase this week as they race to cool down an overheating economy. The question for many economists and investors is just how far the central bank will go in its quest to tame inflation.

Central banks around the world have spent recent weeks speeding up their interest rate increases, an approach they’ve referred to as “front-loading.” That group includes the Fed, which raised interest rates by a quarter-point in March, a half-point in May and three-quarters of a point in June, its biggest move since 1994. Policymakers have signaled that another three-quarter-point move is likely on Wednesday.

The quick moves are meant to show that officials are determined to wrestle inflation lower, hoping to convince businesses and families that today’s rapid inflation won’t last. And, by raising interest rates quickly, officials are aiming to swiftly return policy to a setting at which it is no longer adding to economic growth, because goosing the economy makes little sense at a moment when jobs are plentiful and prices are climbing quickly.

released in June suggested that officials would raise rates to 3.4 percent by the end of the year, up from around 1.6 percent now. Many economists have interpreted that to mean that the Fed will raise rates by three-quarters of a point this month, half of a point in September, a quarter-point in November and a quarter-point in December. In other words, it hints that a slowdown is coming.

But policy expectations have regularly been upended this year as data surprises officials and inflation proves stubbornly hot. Just this month, investors were speculating that the Fed might make a full percentage-point increase this week, only to simmer down after central bankers and fresh data signaled that a smaller move was more likely.

That changeability is a key reason that the Fed is likely to emphasize that it is closely watching economic data as it determines policy. Its next meeting is nearly two months away, in September, so central bankers will most likely want to keep their options open so that they can react to the evolving economic situation.

inflation has been running at the fastest pace in more than 40 years, it is likely to slow when July data is released because gasoline prices have come down notably this month.

And, although inflation expectations had shown signs of jumping higher, one key measure eased in early data out this month. Keeping inflation expectations in check is paramount because consumers and companies might change their behavior if they expect quick inflation to last. Workers could ask for higher pay to cover rising costs, companies might continually lift prices to cover climbing wage bills and the problem of rising prices would be perpetuated.

A variety of other metrics of the economy’s strength, from jobless claims to manufacturing measures, point to a slowing business environment. If that cooling continues, it should keep the Fed on track to slow down, said Subadra Rajappa, the head of U.S. rates strategy at Société Générale. While Fed officials want the economy to moderate, they are trying to avoid tipping it into an outright recession.

“When you start to see cracks appear in the unemployment measures, they’re going to have to take a much more cautious approach,” Ms. Rajappa said.

Markets have been quivering in recent days, concerned that central banks around the world will push their war on inflation too far and tank economies in the process. Investors are increasingly betting that the Fed might lower interest rates next year, presumably because they expect the central bank to set off a downturn.

“It is very likely that central banks will hike so quickly that they will overdo it and put their economies into a recession,” said Gennadiy Goldberg, a rates strategist at TD Securities. “That’s what markets are afraid of.”

American employers added 372,000 jobs in June, and wages continue to climb strongly. Consumer spending has eased somewhat, but less than expected. While the housing market is slowing, rents continue to pick up in many markets.

Plus, the outlook for inflation is dicey. While gas prices may be slowing for now, risks of a resurgence lie ahead, because, for example, the administration’s efforts to impose a global price cap on Russian oil exports could fall through. Rising rents mean that housing costs could help to keep inflation elevated.

While Mr. Powell made clear at his June news conference that three-quarter-point rate increases were out of the ordinary and that he did “not expect” them to be common, Fed officials have also been clear that they would like to see a string of slowing inflation readings before feeling more confident that price increases are coming under control.

“We at the Fed have to be very deliberate and intentional about continuing on this path of raising our interest rate until we get and see convincing evidence that inflation has turned a corner,” Loretta Mester, the president of the Federal Reserve Bank of Cleveland, said in a Bloomberg interview this month.

The central bank will get a fresh reading on the Personal Consumption Expenditures index — its preferred inflation gauge — on Friday. That data will be for June, and it is expected to show continued rapid inflation both on a headline basis and after volatile food and fuel prices are stripped out. The Employment Cost Index, a wage and benefits measure that the Fed watches closely, will also be released that day and is expected to show compensation climbing quickly.

Given the recent decline in prices at the gas pump, at least two months of slower inflation readings by September are possible — but not guaranteed.

“They cannot prematurely hint that they think victory over inflation is coming,” Mr. Shepherdson of Pantheon wrote.

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Fed Moves Toward Another Big Rate Increase as Inflation Lingers

WASHINGTON — The Federal Reserve, determined to choke off rapid inflation before it becomes a permanent feature of the American economy, is steering toward another three-quarter-point interest rate increase later this month even as the economy shows early signs of slowing and recession fears mount.

Economic data suggest that the United States could be headed for a rough road: Consumer confidence has plummeted, the economy could post two straight quarters of negative growth, new factory orders have sagged and oil and gas commodity prices have dipped sharply lower this week as investors fear an impending downturn.

But that weakening is unlikely to dissuade central bankers. Some degree of economic slowdown would be welcome news for the Fed — which is actively trying to cool the economy — and a commitment to restoring price stability could keep officials on an aggressive policy path.

at or near the fastest pace in four decades, and the job market, while moderating somewhat, remains unusually strong, with 1.9 available jobs for every unemployed worker. Fed policymakers are likely to focus on those factors as they head into their July meeting, especially because their policy interest rate — which guides how expensive it is to borrow money — is still low enough that it is likely spurring economic activity rather than subtracting from it.

released Wednesday, made it clear that officials are eager to move rates up to a point where they are weighing on growth as policymakers ramp up their battle against inflation.

The central bank will announce its next rate decision on July 27, and several key data points are set for release between now and then, including the latest jobs numbers for June and updated Consumer Price Index inflation figures — so the size of the move is not set in stone. But assuming the economy remains strong, inflation remains high and glimmers of moderation remain far from conclusive, a big rate move may well be in store.

The Fed chair, Jerome H. Powell, has said that central bankers will debate between a 0.5- or 0.75-percentage-point increase at the coming gathering, but officials have begun to line up behind the more rapid pace of action if recent economic trends hold.

“If conditions were exactly the way they were today going into that meeting — if the meeting were today — I would be advocating for 75 because I haven’t seen the kind of numbers on the inflation side that I need to see,” Loretta J. Mester, the president of the Federal Reserve Bank of Cleveland, said during a television interview last week.

they have signaled that they are willing to inflict some economic pain if that is what is needed to wrestle inflation back down.

500,000 jobs per month so far in 2022 and consumer spending — while cracking slightly under the weight of inflation — has been relatively strong.

Meanwhile, officials have been unnerved by both the speed and the staying power of inflation. The Consumer Price Index measure picked up by 8.6 percent over the year through May, and several economists said it probably continued to accelerate on a yearly basis into the June report, which is set for release on July 13. Omair Sharif, the founder of Inflation Insights, estimated that it could come in around 8.8 percent.

“You do probably get a few months of moderation after we get this June report,” he said.

The Fed’s preferred inflation measure, the Personal Consumption Expenditures index, may have already peaked, economists said. But it still climbed by 6.3 percent over the year through May, more than three times the central bank’s 2 percent target. Many households are struggling to keep up with the rising cost of housing, food and transportation.

While there are encouraging signs that inflation might slow soon — inventories have built up at retailers, global commodity gas prices have fallen this week and consumer demand for some goods may be beginning to slow — those indicators may do little to comfort central bankers at this stage.

The Fed has been repeatedly disappointed by false dawns. Officials had hoped that inflation peaked last summer, only to watch it reaccelerate into the fall. They have been receiving regular Wall Street predictions that it might be reaching its zenith, but those have yet to prove correct.

have signaled that they expect to push rates up to about 3.4 percent by the end of the year as they try to choke off price increases. They could achieve that by raising rates by 0.75 percentage points at their coming July meeting, 0.5 percentage points in September and 0.25 percentage points in November and December, for instance.

“What you would like to do, if we can, is nip inflation in the bud before it gets entrenched in the economy,” James Bullard, the president of the Federal Reserve Bank of St. Louis, said during a presentation in Zurich on June 24.

That is also the logic for making big moves sooner rather than later. Charles L. Evans, the president of the Federal Reserve Bank of Chicago, told reporters a few days earlier that a 0.75 percentage point move in July was “a very reasonable place to have a discussion” and would be likely unless inflation began moderating.

The Fed will have new information by the time of its July meeting, but the central bank may prove less sensitive than usual to incoming data in today’s environment. Minor updates might do little to change a picture in which price increases have been going gangbusters for months on end and officials believe expectations of rising inflation could lurch out of control.

“The data they’re responding to has been accumulating over the past year,” said Mr. Feroli of JPMorgan. “It was realizing that, over the past year, they missed the boat on inflation.”

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