(Washington) U.S. gross domestic product (GDP) contracted again in the second quarter, raising risks that the world’s largest economy slides into recession months before a key Joe Biden election.
Posted at 8:42
Updated at 10:20am
The contraction in GDP is 0.9% on an annualized basis, a measure favored by the United States, which compares to the previous quarter and then forecasts developments for the full year, according to figures released by the Commerce Department on Thursday.
It had already fallen by 1.6% in the first quarter.
The commonly accepted definition of a recession is two straight quarters of contracting GDP, but many economists, including the Joe Biden administration, say the economy is not in recession on other, more benign indicators, such as employment.
Despite this drop in GDP, the American economy is “on the right track”, the American President assured in a press release.
“It is not surprising that the economy is slowing as the Federal Reserve takes measures to reduce inflation,” he added.
Consumption remains stable
Indeed, the US Federal Reserve is deliberately slowing economic activity to ease pressure on prices, while inflation hit a new record high of 9.1% over a year in June.
Its President Jerome Powell reiterated on Wednesday “that there is a way to bring down inflation while supporting a solid job market,” without considering “that the American economy is now in recession,” despite “a slowdown.” of expenses”.
Joe Biden’s Secretary of Commerce and Finance, Janet Yellen, will hold a press conference at 1:30 p.m.
The Commerce Department said the decline in GDP in the second quarter reflected the decline in business investment and household home purchases. Federal, state and local governments have also cut spending.
Consumption, the engine of US growth, held up. But that’s thanks to spending on services, prices of which have risen with inflation.
The decline in GDP over the quarter is 0.2% if we simply compare it to the previous quarter, as is the case in other advanced economies.
recession or not?
So is the United States in recession or not? This means that the debate that has been going on for several days can be resumed.
In the US, only one body is authorized to officially determine recession times, the National Bureau of Economic Research (NBER), albeit with a delay of several months.
We are “looking at a number of indicators,” says NBER on its website, which also monitors “the magnitude of the drop in activity.”
At 3.6%, the unemployment rate is very close to pre-pandemic levels, its lowest in 50 years, and employers are still struggling to hire new workers.
However, “recent spending and manufacturing indicators have slowed down,” the Fed acknowledged on Wednesday.
Consumer spending, the driving force behind the American economy, surprised again with its strength in June. But spending levels have been inflated by inflation, and consumers are leaving with a smaller basket for the same bill.
Management is trying to put out the fire.
“What a recession really means is a general contraction in the economy. And even if that number is negative, we are not in a recession now,” Janet Yellen said on Sunday.
But the opposition sees this as an attempt to manipulate the numbers. “Scoop for Joe Biden: You can’t change reality by arguing about definitions,” the Republican Party responded.
For its part, the IMF has significantly lowered its 2022 growth forecast for the United States, now expecting just 2.3% (down from 3.7% in April), driving “weaker growth at the start of the year”. and the consequences of inflation.
US GDP shrank by 3.4% in 2020 as a result of the COVID-19 crisis, before rebounding by 5.7% in 2021.