US GDP sinks 0.9% in second quarter, signaling a recession

The US gross home product posted its second straight quarterly decline in an alarming growth that economists broadly view because the definition of an financial recession.

The economic system shrank by 0.9% in the second quarter, contracting regardless of economists’ expectations of muted 0.3% progress, in keeping with Commerce Department information. The GDP report is the broadest indication of the US economic system’s efficiency.

The downtick adopted a first-quarter report in which the US economic system posted a shock decline of 1.6%.

The GDP report was launched in the future after the Federal Reserve hiked its benchmark curiosity rate by three-quarters of a proportion level for the second straight month to chill inflation, which hit 9.1% in June.

The Fed’s sharp rate hikes have exacerbated investor considerations about its potential to engineer a “soft landing” by taming inflation with out inflicting an financial downturn. Meanwhile, companies and customers alike are going through the twin affect of inflation that has sapped their shopping for energy and better rates of interest which have made borrowing money costlier.

The GDP downturn adopted assurances by high financial policymakers that the underlying economic system is powerful. Fed Chair Jerome Powell indicated on Wednesday that he doesn’t see the US economic system in a recession at current.

The actual gross home product (GDP) decreased at an annual rate of 0.9 p.c in the second quarter of 2022.
Bureau of Economic Analysis

“I do not think the US is currently in a recession and the reason is, there’s just too many areas of the economy that are performing too well,” Powell mentioned at a press convention.

Treasury Secretary Janet Yellen has additionally rejected that notion that a recession is already underway.

“You don’t see any of the signs now,” Yellen mentioned. “A recession is a broad-based contraction that effects many sectors of the economy. We just don’t have that.”

Yellen added that she can be “amazed” if the National Bureau of Economic Research declares a recession in the close to future.

“I would be amazed if the NBER would declare this period to be a recession, even if it happens to have two quarters of negative growth,” she mentioned. “We’ve got a very strong labor market. When you’re creating almost 400,000 jobs a month, that is not a recession.”

The National Bureau of Economic Research is considered as an authority on recessions and defines them as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.” While two straight quarters of GDP decline are informally seen as indicative of recession, the NBER doesn’t assign a particular timeframe to its definition. 

Meanwhile, the White House tried harm management forward of the report’s launch. The Biden administration launched a weblog submit arguing a recession was “unlikely” even when GDP declined for the second straight quarter.

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