U.S. economy shrinks for 2nd straight quarter, raising fears of a recession
The U.S. economy contracted from April through June for the second consecutive quarter, shrinking at an annual rate of 0.9 percent and igniting concerns that the country might be headed for a recession.
The decrease in the gross domestic product, the most comprehensive indicator of the economy, that the Commerce Department released on Thursday, July 28, came after a 1.6 percent annual reduction from January through March. One informal, but not absolutely certain, sign of a recession is GDP decline over successive quarters.
The publication of the report comes at a crucial time for the nation’s consumers and businesses, who have been suffering from severe inflation and rising borrowing prices.
The report comes just a day after the US Federal Reserve raised its benchmark interest rate by 0.75 per cent for the second time in a row as it continues efforts to conquer the worst surge in inflation in four decades.
The Fed is hoping to achieve a notoriously difficult “soft landing”: An economic slowdown that manages to rein in rocketing prices without triggering a recession.
The strength of America’s job market, Federal Reserve Chair Jerome Powell said at a news conference on Wednesday, “makes you question the GDP data”.
Asked whether he thought the US was in a recession, Mr. Powell said he did not think it was, citing the “remarkably strong” labor market and adding “it doesn’t make sense” for the country to be in a recession right now.
Mr. Powell also correctly noted that US GDP data is often revised at a later date. In its press release on Thursday morning the BEA noted that the GDP estimate was based on source data that are either incomplete or subject to revision from the source agency and that the second estimate for the quarter will be released 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”.