US gross domestic product (GDP) contracted again in the second quarter, raising the risk that the world’s largest economy slips into recession months ahead of a key election for Joe Biden.
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The contraction in GDP is 0.9% on an annualized basis, a measure favored by the United States, which compares to the previous quarter and then forecasts developments for the full year, according to figures released by the Commerce Department on Thursday.
It had already fallen by 1.6% in the first quarter.
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 in recession based on other more favorable indicators, such as employment.
Joe Biden’s Secretary of Commerce and Finance, Janet Yellen, will hold a news conference at 1:30 p.m. (5:30 p.m. GMT).
The Commerce Department said the decline in GDP in the second quarter reflected the decline in business investment and household home purchases. Federal, state and local governments have also cut spending.
Consumption, the engine of US growth, held up. But that’s thanks to spending on services, prices of which have risen 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.
“Extent of Decline”
Whether the USA has fallen into a 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 are “looking at a number of indicators,” says NBER on its website, which also monitors “the magnitude of the drop in activity.”
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 in a recession now,” she said on Sunday.
But the opposition sees this as an attempt to manipulate the numbers. “Scoop for Joe Biden: You can’t change reality by arguing about definitions,” the Republican Party responded.
Slower
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 manufacturing indicators have slowed down,” the Fed acknowledged on Wednesday.
Consumer spending, the driving force behind the American 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), driving “weaker growth at the start of the year”. and 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.