Production has already fallen by 1.6% in the first three months of the year. The fear of a recession is more relevant than ever.
The United States’ gross domestic product (GDP) contracted another 0.9% annualized in the second quarter, raising the risk of the world’s largest economy sliding into recession. In the first quarter, GDP contracted 1.6%, according to figures released by the Commerce Department on Thursday.
The commonly accepted definition of a recession is two consecutive quarters of contracting GDP, but many economists, as well as the Biden administration, argue that the economy is not necessarily in recession based on other more favorable indicators, such as employment. Joe Biden’s Treasury Secretary – title equivalent to Secretary of Commerce and Finance – Janet Yellen will hold a press conference at 1:30 p.m. (3:30 p.m. in France).
The Commerce Department said the decline in GDP reflected the decline in business investment and household home purchases. Federal, state and local governments have also cut spending. Consumption held up thanks to spending on services, the prices of which, however, rose with inflation. The decline in GDP over the quarter is 0.2% if we simply compare it to the previous quarter, as is the case in other advanced economies.
Debates about a possible recession
Whether the US has fallen into recession or not: This means that the debate that has been going on for a few days can be resumed. In the US, only one body is authorized to officially determine recession times, the National Bureau of Economic Research (NBER), albeit with a delay of several months. We “Consider a set of indicators“, Details on his side of the NBER, which also observed”the extent of the decline in activity“.
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President Joe Biden said Monday his country will not experience a recession and his administration is trying to put out the fire. Treasury Secretary Janet Yellen said no, the world’s largest economy is not in recession. “What a recession really means is a general contraction in the economy. And even if that number is negative, we’re not currently in a recession.‘ she said on Sunday. But the opposition sees this as an attempt to manipulate the figures. “Scoop for Joe Biden: You can’t change reality by arguing about definitions‘ the Republican Party responded.
Unemployment rate at 3.6%
At 3.6%, the unemployment rate is very close to pre-pandemic levels, its lowest in 50 years, and employers are still struggling to hire new workers. However, “recent spending and production indicators have slowed‘ the Fed conceded on Wednesday. Consumer spending, the driving force behind the US economy, surprised again with its strength in June. But spending levels have been inflated by inflation, and consumers are leaving with a smaller basket for the same bill.
For its part, the IMF has significantly lowered its 2022 growth forecast for the United States, now expecting just 2.3% (down from 3.7% in April) and rising “weaker growth at the beginning of the yearand the consequences of inflation. US GDP shrank by 3.4% in 2020 as a result of the Covid-19 crisis, before rebounding by 5.7% in 2021.
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