The US has technically entered a recession, as President avoids calling it that but acknowledges that ‘the economy is slowing down’.
America’s economy shrank for the second consecutive quarter in the spring, meeting the widely accepted criteria for a recession, according to a released by the US Department of Commerce’s Bureau of Economic Analysis on Thursday morning.
Gross domestic product (GDP), the broadest measure of the price of goods and services, dropped by 0.9% at an annualized pace from April to June, the ‘advance’ estimate indicated. It comes after a 1.6% decline in the first quarter of 2022, and is worse than the Dow Jones estimate of a 0.3% gain.
The National Bureau of Economic Research officially declares recessions as well as expansions, but it is unlikely to call it for the given time frame, at least for a few months.
Thursday’s reading is a blow to the Biden administration, which many have blamed for record-high inflation and soaring interest rates that have caused consumers to tighten their purse strings.
Reacting to the second quarter GDP report, Biden avoided addressing the recession issue. Instead, he said his economic plan is focused on preserving ‘economic gains’ including a strong job market and low unemployment.
‘Coming off of last year’s historic economic growth – and regaining all the private sector jobs lost during the pandemic crisis – it’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation,’ Biden on Thursday morning.
‘But even as we face historic global challenges, we are on the right path and we will come through this transition stronger and more secure.’
Hours later, Biden spoke on the Inflation Reduction Act, a new Democratic bill in Congress that addresses a range of issues from corporate taxes to prescription drug costs to climate. After his prepared remarks, Biden commented on ‘whether or not we are in a recession’.
‘Both (Federal Reserve) Chairman Powell and many of the significant banking personnel and economists say we’re not in a recession,’ Biden said from the White House State Dining Room. ‘Let me give you what the actual facts are in terms of the state of the economy.’
Biden rattled off figures on the ‘record’ job market, low unemployment rate and job creation, and said businesses are investing in America and manufacturing is expanding.
‘That doesn’t sound like a recession to me,’ he concluded, and walked away as reporters shouted questions.
The latest GDP figures come a day after the Federal Reserve raised interest rates by a historic three-quarters of a percentage point, the largest hike since 1994, matching the .
Biden on Monday said ‘we’re not coming into recession, in my view’.
‘I don’t think we’re going to – God willing – I don’t think we’re going to see a recession,’ he said.
Despite the US meeting the rule of thumb for a recession, many economists say the nation has not reached that point.
‘The US economy is struggling. We now expect growth to struggle to reach potential both this year and next,’ wrote Moody’s Analytics senior director Scott Hoyt. ‘However, we don’t believe the economy is in a recession.’
Capital Economics senior US economist Andrew Hunter told : ‘The 0.9% annualized fall in GDP in the second quarter is disappointing but doesn’t mean the economy is in recession.’
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