Production has already recorded a decline of 1.6% in the first three months of the year. The fear of a recession is more relevant than ever.
The gross domestic product (GDP) of the United States contracted again in the second quarter, by 0.9% at an annualized rate, which increases the risks of seeing the world’s largest economy plunging into recession. In the first quarter, GDP shrank 1.6%, according to data released Thursday by the Commerce Department.
The commonly accepted definition of a recession is two consecutive quarters of falling GDP, but many economists, as well as the Biden administration, argue that the economy is not necessarily in a recession, however, due to other more favorable indicators, such as the occupation. Joe Biden’s Treasury Secretary – a title corresponding to the Minister of Economy and Finance – Janet Yellen will hold a press conference at 1.30pm (3.30pm in France).
The Commerce Department said the decline in GDP reflects the decline in business investment and household home purchases. Federal, state and local governments also held back spending. Consumption held up thanks to spending on services, which however saw its prices rise with inflation. The decline in GDP in the quarter is 0.2% if we limit ourselves to comparing it with the previous quarter, as well as other advanced economies.
Discuss a possible recession
Whether the United States has plunged into recession or not: the debate, which has been raging for several days, will thus be able to restart. Only one body in the United States is authorized to officially determine periods of recession, the National Bureau of Economic Research (NBER), but this is several months late. We “consider a number of indicators“, Details on its website the NBER, which also observes”the extent of the decline in activity“.
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President Joe Biden said on Monday that his country will not experience a recession and his administration is trying to put out the fire. Treasury Secretary Janet Yellen assured that no, the largest economy in the world was not in a recession. “What a recession really means is a general contraction of the economy. And even if this number is negative, we are not in a recession right now.“He said on Sunday. But the opposition sees it as an attempt to manipulate numbers. “Scoop for Joe Biden: You can’t change reality by arguing over definitions“, The Republican Party reacted.
Unemployment rate at 3.6%
The unemployment rate, at 3.6%, is very close to the pre-pandemic level, which was the lowest in 50 years, and employers are still struggling to hire. However, “recent spending and production indicators have slowed down“, The Fed conceded Wednesday. Consumption, the driving force behind the US economy, surprised again with its strength in June. But the amount of spending has been inflated by inflation and consumers, for the same bill, leave with a smaller basket.
The IMF, for its part, has sharply revised its growth forecasts for the United States for 2022, and now expects only 2.3% (when it still anticipated 3.7% in April), advancing “weaker growth at the beginning of the yearand the consequences of inflation. US GDP contracted 3.4% in 2020 following the Covid-19 crisis, before rebounding 5.7% in 2021. The US economy is “on the right path“, Finally affirmed, for his part, the American president Joe Biden. “Unsurprisingly, the economy is slowing as the Federal Reserve takes action to curb inflation“Said the president of the United States in a statement.
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