A recap of this week’s top-five news items and resources from the intersection of business and government.
1. U.S. economy shrunk at a slower pace in second quarter, new estimate shows
On Thursday, the Bureau of Economic Analysis (BEA) released revised data indicating that the U.S. economy shrunk at a slower pace between April and June than the federal government had initially calculated. The agency reported that GDP fell at an annualized rate of 0.6% during the second quarter of 2022, down 0.3 percentage points from the 0.9 percent decline the agency estimated in July. However, despite the decline in growth being less severe than first estimated, the U.S. economy still appeared to contract for two consecutive quarters. In the past, two straight quarters of negative GDP growth was the threshold for entering a recession. But economists argue that the strength of the U.S. labor market and other parts of the economy make it unlikely the country is currently in a recession.
“With many still asking whether the economy is in a recession, it’s important to reiterate that my preferred ‘triple P’ recession rule isn’t satisfied: a recession is a persistent (lasting in time), profound (in magnitude) and pervasive (across regions and sectors) contraction in economic activity,” wrote Gregory Daco, chief economist at EY-Parthenon, in Thursday’s analysis.
2. U.S. retail sales were flat in July as inflation takes a toll
Last week, the Commerce Department released data showing the pace of retail sales remained unchanged in July as high inflation and rising interest rates continue to force Americans to spend more cautiously. Despite economists’ predictions of a slight increase in retail purchases, sales remained flat after having risen 0.8% in June. The report contained some positive economic indicators like a 1.8% decrease in gas prices.
“As gas prices fell, consumers had more money in their pockets for other items such as furniture and electronics,’’ said Jeffrey Roach, chief economist at LPL Financial.
Americans have shifted their spending towards essentials like groceries and away from less necessary things like electronics, furniture and new clothes. Even though inflation continues to pose a severe hardship for many families, employers added 528,000 jobs in July and the unemployment rate dropped to 3.5%, matching a half-century low reached just before the pandemic began in 2020. These are two positive indicators that our economy is heading in the right direction.
3. Tax credits, grants and loans for businesses in the Inflation Reduction Act
The Inflation Reduction Act recently signed by President Joe Biden contains a series of tax credits and potentially lucrative programs for businesses in the energy sector, but sifting through the legislation is a challenge for small-business owners, experts say.
“Unless you are a large company with a big compliance or regulatory department, it’s finding the time to dig into the bill,” said Vice President of Federal Affairs at Shumaker Advisors LLC Ryan Walker. “There are so many minute opportunities, and if you didn’t know where you are looking, you are not going to be able to find it.”
One of the tax credits included in the bill, the “45Q” tax credit, provides credits and benefits related to carbon capture and storage. It increases the tax credit to $85 per ton and decreases the eligibility threshold for qualifying projects. Like this tax credit, there are many more tax credits and programs that could benefit business owners looking to invest or expand into new areas buried in the legislation. Read the full story for a list of other credits, loans and grants included in the Inflation Reduction Act.
4. U.S. Chamber of Commerce: Inflation is creating a ‘perfect storm’ of challenges for small business owners
The latest U.S. Chamber and MetLife Small Business Index revealed that although the Consumer Price Index fell slightly last month, continued high inflation levels pose many challenges for small businesses making it their top concern. Nearly 7 in 10 say they raised prices to cope with rising input costs. The U.S. Chamber of Commerce interviewed four small businesses across different industries and regions of the country, which gave the same narrative of how many small business owners are handling the impacts of inflation.
5. Explainer: How Biden’s student loan forgiveness will impact U.S. consumers
On Wednesday, President Joe Biden announced a plan to eliminate billions of dollars in student debt, impacting an estimated 20 million borrowers. It will cancel up to $10,000 in student loan debt for borrowers making less than $125,000 a year or $250,000 for married couples. The Biden administration hasn’t released final figures on how much this would cost, but private economists have estimated that this could add $300 billion to $600 billion to the federal debt. Opposers argue that forgiving loans would increase consumer spending and could drive up the prices of homes, cars and other consumer goods, worsening inflation. But the White House and some economists argue the opposite.
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Congressional Roundup: Sept. 14 in D.C.
Receive a front-row seat on Capitol Hill for a program tailored specifically to your top business priorities. Confirmed speakers include Senators Ben Cardin and Chris Van Hollen, and Representatives Andy Harris, Kweisi Mfume, Dutch Ruppersberger, John Sarbanes and David Trone.
Visit our event page as we update our speakers list with more confirmations.