Consumers should curb spending in case of recession, expert says

The U.S. economy shrank for the second straight quarter, according to the latest GDP report. From April through June, economic activity fell at a 0.9% annual pace.

The GDP report is the country's broadest gauge of the U.S. economy. This second straight decline, according to many experts, is a sign that the country is entering a recession.

"The message is clear here, consumers need to take some action here," Better Qualified President Paul Oster said. "You can't continue to behave the way you have for the past couple of years. If you do that, they're going to find themselves in a hole that they might not be able to dig out of."

Supply-chain issues drove businesses to invest less in inventory this last quarter and consumer spending slowed as Americans are buying fewer goods.

But the federal government has been trying to cool off the economy for a while. The Federal Reserve on Wednesday hiked its benchmark interest rate for the second time in a row in order to help cut down on inflation.

Oster said the best thing for consumers to do right now is slow down their spending.

"That's what the higher interest rates, it's intended to do," Oster said. "So maybe you hang on to the family car for another six months to a year. Maybe you don't go on vacation."

The White House for the past few weeks has been trying to temper expectations from this GDP report.

President Joe Biden said after a year of rapid growth, the economy is slowing down, which could help with inflation.

"There is going to be a lot of chatter today on Wall Street and among pundits about whether we are in a recession," Biden said. "But if you look at our job market, consumer spending, business investment—we see signs of economic progress."

Fed Chair Jerome Powell said on Wednesday that no matter what the GDP report says, the strong labor market and low unemployment numbers are not indicative of a recession.

"This is a very strong labor market — and [a recession is] just not consistent with the 2.7 million people hired in the first half of the year," Powell said. "It doesn't make sense that the economy would be in recession with this kind of thing happening."

These GDP numbers are usually revised as these outside factors are taken into account. A small group of economists on the Business Cycle Dating Committee are the ones to officially define when the U.S. economy is in a recession.