U.S. economy shrinks for 2nd straight quarter, raising fears of a recession

 

The U.S. economy shrank from April through June for a second straight quarter, contracting at a 0.9% yearly speed and raising feelings of trepidation that the country might be moving toward a recession.

The decline that the Commerce Department detailed Thursday July 28, in the GDP the broadest guage of the economy followed a 1.6% yearly drop from January through March. Consecutive quarters of falling GDP comprise one casual, however not conclusive, mark of a recession.

The report comes at a crucial time as the nation's consumers and businesses have been struggling under the heaviness of rebuffing inflation and higher borrowing costs.

The report comes just a day after the US Federal Reserve raised its benchmark interest rate by 0.75 percent for the second time in succession as it proceeds with endeavors to overcome the most horrendously terrible surge in inflation in forty years.

The Fed is expecting to accomplish a famously troublesome "soft landing": An economic slowdown that figures out how to get control over soaring costs without setting off a recession.

The strength of America's work market, Federal Reserve Chair Jerome Powell said at a news gathering on Wednesday, "makes you question the GDP data".

Asked if he thought the US was in a recession, Mr Powell said he didn't think it was, refering to the "remarkably strong" labour market and adding "it doesn't make sense" for the country to be in a recession at this moment.

Mr Powell likewise accurately noted that US GDP data is frequently changed in a later date. In its official statement on Thursday morning the BEA noted that the GDP estimate depended on source data that are either deficient or dependent upon revision from the source agency and that the second estimate for the quarter will be delivered on 25 August.

The most widely accepted definition of a recession comes from the National Bureau of Economic Research, a group of economists whose Business Cycle Dating Committee defines it as “a significant decline in economic activity that is spread across the economy and lasts more than a few months”.

 

In a statement released by the White House, President Joe Biden said: “It’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation. 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. Our job market remains historically strong, with unemployment at 3.6 per cent and more than 1 million jobs created in the second quarter alone. Consumer spending is continuing to grow.”

 

 

Prior to the release of today’s data, forecasters surveyed by the data firm FactSet had estimated that the nation’s GDP made a tepid annual gain of 0.8 per cent between the beginning of April and the end of June. Others believed a more anaemic level of 0.2 per cent was possible.

 

The Federal Reserve Bank of Atlanta’s running estimate of GDP growth, based on available economic data, signalled a 1.2 per cent second quarter decline was on the cards.