Report: US Recession Fears Deepen As Economy Contracts In Second Quarter
Report: US recession fears increase as economy shrinks in second quarter
The US economy contracted for the second quarter in a row between April and June, government data showed on Thursday, raising fears of a recession and a headache for President Joe Biden ahead of the midterm elections.
Gross domestic product fell at an annual rate of 0.9% in the second quarter, after a steep decline in the first three months of the year, according to the Commerce Department.
Although not the official definition, two quarters of negative growth is seen as a strong signal that the recession is on the way, and the economy is slowing down. in the world will have global consequences, and more than national political costs.
Biden insisted that the US economy is “on track” despite the collapse, but critics will be sure to take the news as evidence of the Democrat president’s control.
After a 1.6% decline in the first three months of the year, the report said the decline in the last quarter was due to lower government spending at all levels and private investment in goods. , including cars, and housing, despite the increase in exports. But personal consumption expenditures (PCE) continued to rise, albeit at a slower pace than in the previous decade, the data showed.
The US economy continues to struggle with sky-high prices, due to import chains from the Covid-19 lockdown, and the fallout from the war in Russia and Ukraine which has driven up commodity prices. is rising. food and fuel.
Consumer prices rose more than 9% in June, the highest in more than four decades, while GDP data showed another important measure of inflation, the PCE price, rose by 7.1% in the previous three months. , as in January. -Time of March.
The United States central bank raised interest rates sharply – with the last big increase on Wednesday – in an effort to cool the economy and ease price pressures.
“It’s no surprise that the economy is slowing as the Federal Reserve pushes to contain inflation,” Biden said in a statement shortly after the GDP report was released. “And although we are facing a global challenge of history, we are on the right path and we will come out of this transition stronger and more secure,” he said, and – declared that “the US labor market remains historically strong.” and wealth has been created. more than one million jobs in the last three months.
- The debate about recession –
It would be unusual for an economy that continues to generate strong jobs and near-record unemployment to fall into a recession, but even many experts ‘Economics says the conversation about failure is when, not if.
This poses a political headache for the president, who has seen his approval ratings plummet in recent months as American families struggle to make ends meet due to rising costs and – climb up.
Fed Chairman Jerome Powell agreed with Biden and economists who say the GDP numbers are inconsistent with other hard data.
Powell said Wednesday that he does not think the country is currently in a recession because “there are many parts of the economy that are doing well.”
Mike Fratantoni, chief economist of the Mortgage Bankers Association, was among those who echoed Powell’s views, saying that “continuing strength in the labor market and other signs of growth make this don’t be called recession”.
Powell also said it is possible to reduce price pressures without causing a slowdown or a rise in unemployment, although he acknowledged that the way to move the needle is narrowing. But economist Mohamed El-Erian said on Twitter that the data points to “increasing stagflation and red-hot recession risks”.
This idea is perhaps the one that remains in the minds of investors and consumers.
Wall Street was not happy with the data. After a big jump followed the Fed rate, all three major stock indexes fell by mid-morning.
