Fears are growing across the Atlantic and on the international markets. United States gross domestic product (GDP) contracted again in the second quarter, by an annualized 0.9%. In the first quarter, GDP had already contracted by 1.6%, according to figures released by the Department of Commerce on Thursday, July 28.
With this fall in GDP in the second quarter, the US economy fits the classic definition of a technical recession. But many economists, as well as the Biden administration, dismiss the idea of a recession, arguing that there are other, more favorable indicators, such as employment; they are based in particular on the official definition of the National Bureau of Economic Studies (NBER).
This organization, considered “the official arbiter of the recession” in the United States defines a recession as “a significant decline in economic activity, spreading across the economy and lasting more than a few months, usually visible in output, employment, real income and other indicators.”
The White House rejects the idea of a recession
Job growth in the United States averaged 456,700 jobs per month in the first half of the year, leading to sharp increases in wages. Household consumption held up thanks to spending on services.
Still, downside risks to the economy have increased, as evidenced by the slowdown in housing starts and home sales, while business sentiment and household confidence have deteriorated in recent months.
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.
The White House has staunchly dismissed the idea of a recession and is trying to reassure Americans ahead of the Nov. 8 midterm elections that will decide whether President Joe Biden’s Democratic Party will retain control of Congress. Mr. Biden thus claimed that the American economy was “On the right way”. according to him “It is not surprising that the economy is slowing as the Federal Reserve acts to reduce inflation.”.
On Wednesday, the US Federal Reserve increased its key interest rate again by 0.75 points to between 2.25 and 2.50%. US Treasury Secretary Janet Yellen will hold a press conference at 7:30 p.m. Paris time.