The U.S. economy shrunk for an immediate second quarter between April and June, executives confirmed Thursday, including the essence of recession fears in President Joe Biden’s jigsaw puzzle ahead of the mid-election -mandate.
Gross domestic product shrank at an annual rate of 0.9% in the second quarter, following a steeper decline in the first three months of the year, according to the Commerce Department.
Although no longer the authentic definition, two quarters of detrimental expansion are often seen as a powerful sign that a recession is underway, and a downturn in the planet’s largest economic system would have global consequences. , in addition to national political awards.
Mr Biden has insisted that the US economy is “on track”, despite the downturn, but his critics are sure to see the document as evidence of the veteran Democrat’s mismanagement.
After a decline of 1.6% in the first three months of the year, the document mentions that the slowdown in the last quarter was largely due to lower spending by executives in all respects and private financing of items, including vehicles. , and on residential construction, despite an increase in exports.
But private hospitality spending (PCE) continued to rise, albeit at a slower pace than in the previous quarter, the news confirmed.
The U.S. economy also continues to struggle with sky-high inflation, due to supply chain rumbles due to COVID lockdowns, as well as fallout from Russia’s war in Ukraine that has driven up meal prices. and gasoline.
Consumer prices hit 9% in June, the best in more than four years, while GDP news confirmed another key measure of inflation, the PCE value index, rose 7 .1% in the last three months, as in the January-March period.
The U.S. central bank raised interest rates aggressively — with the latest behemoth building on Wednesday — in an attempt to cool the economy and ease pressures on value.
“It’s no surprise the economy is slowing as the Federal Reserve moves to bring inflation down,” Biden said in a comment shortly after the GDP paper was launched.
“But even though we face historic global challenges, we are on the right path and we will get through this transition stronger and more secure,” he said, noting that “the U.S. labor market remains historically strong.” and that the economic system has created more than one million jobs before now 3 months.
It could be very strange that an economic system still comprising jobs at a rapid pace and with unemployment near an all-time high, falls into recession, and many economists say the dialogue of a downturn is more about when, no if.
That poses a big political headache for the president, who has seen his approval rating plummet in recent months as US households struggle to make ends meet due to soaring inflation.
Fed Chairman Jerome Powell agreed with Mr Biden and other economists who say the GDP numbers are inconsistent with other hard knowledge.
Mr Powell said on Wednesday he no longer believed the country had been in a recent recession because “there are too many sectors of the economy that are doing too well”.
Mike Fratantoni, chief economist of the Mortgage Bankers Association, was once among those who echoed Mr Powell’s view, saying “continued strength in the labor market and other signs of growth make it unlikely let it be called a recession”.
Mr Powell also said it was possible to ease pressures on value without causing a slowdown or a major rise in unemployment, although he said the trail to chain that needle was narrowing.
But economist Mohamed El-Erian mentioned on Twitter that the level of knowledge would “aggravate stagflation and flash the risk of recession red.”
This effect is also the person who sticks in the minds of traders and buyers.
Wall Street was once no longer satisfied with knowledge. After giant leaps in the wake of the Fed’s fee hike, all three major stock indexes were reduced in mid-morning buying and selling.