this US economy It contracted in the second quarter at a slightly slower pace than previously reported, but continued to meet the benchmarks for technical recession as severe inflation and high interest rates put pressure on spending.
Gross domestic product, the broadest measure of goods and services produced throughout the economy, contracted 0.6% year-on-year in the second quarter, the Commerce Department said in its second reading of data on Thursday. This is below the originally reported 0.9% drop.
GDP contracted 1.6% in the January-March period, the worst performance since spring 2020 when the economy was in deep throes of the COVID-induced recession.
According to the National Bureau of Economic Research (NBER), which monitors recessions, a recession is technically defined by two quarters of consecutive negative economic growth and is characterized by high unemployment, low or negative GDP growth, falling income, and slowing retail sales.
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The economy, with consecutive declines in growth, technical criteria for recessionThis entails a “significant decline in economic activity that spans the economy and lasts for more than a few months.” However, NBER, the semi-official referee, may not approve immediately, as it often takes up to a year to call him.
NBER also stressed that it relies more on data than GDP in determining whether there is a recession that remains strong in the first six months of the year, such as unemployment and consumer spending. It also takes into account the depth of any decline in economic activity.
“Thus, real GDP can fall by relatively small amounts over two consecutive quarters without warranting a judgment that a peak has occurred,” the nonprofit website said.
The committee does not meet regularly, but only when members decide it is necessary.
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The latest decline is due to a number of factors, including declines in private stocks, residential and non-residential investment, and government spending at the federal, state and local levels. These decreases were offset by increases in net exports (the difference between what the US exports and imports) and increases in consumer spending, which accounts for two-thirds of GDP.
The report showed that consumers are spending much less than during the winter months, and personal consumption spending rose only 1% during this period as high inflation persists and erodes Americans’ purchasing power.
The report could complicate the Federal Reserve’s policy trajectory as it weighs how quickly to raise interest rates to tame inflation without crushing inflation and fueling a growing political crisis for President Biden, who has seen his approval rating drop along with a faltering economy. economic growth.
Central bank policy makers raised benchmark interest rates by 75 basis points in June and July for the first time since 1994. According to the forthcoming economic data, they signaled that there may be another increase of this magnitude in September.
Fed Chairman Jerome Powell He told reporters last month that he did not believe the US economy was in recession.
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“I don’t think the US is in a recession right now, and that’s because there’s a lot of areas of the economy that are performing very well,” Powell said. “This is a very strong labor market. … It doesn’t make sense for the economy to go into a recession while these kinds of events happen.
This is a developing story. Please check back for updates.
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