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US economy shrinks once more, raising recession fears – 07/28/2022 at 21:53


Treasury Secretary Janet Yellen throughout a information convention in Washington on July 28, 2022 (AFP/SAUL LOEB)

US gross home product (GDP) contracted once more within the second quarter, raising the chance of the world’s largest economy plunging into recession months earlier than a key election for Joe Biden.

GDP contracted at an annual price of 0.9%, a measure that favors the United States, in contrast with the earlier quarter after which projected full-yr evolution, based on figures launched Thursday by the Commerce Department.

Weaker development was anticipated, after a decline, already within the first quarter, to 1.6%.

The generally accepted definition of a recession corresponds to 2 consecutive quarters of decline in GDP. But the present scenario “does not seem like a recession, in my view,” Joe Biden responded.

Its Treasury Secretary Janet Yellen additionally stated the US economy, whereas “gradual”, stays “resilient”.

US real GDP, year-on-year and quarter-on-quarter through the first quarter of 2018 (AFP/)

US actual GDP, yr-on-yr and quarter-on-quarter by means of the primary quarter of 2018 (AFP/)

Inflation hit a brand new report in June, at 9.1% in a yr. And slowing it down requires a cooling of financial exercise.

However, based on the minister, “it’s attainable to scale back inflation and preserve a robust labor market”.

“Most economists and most Americans have the identical definition of a recession: giant job losses and large layoffs,” the Treasury secretary stated at a information convention.

“This is just not what we’re presently observing”, he underlined, highlighting the multiple million jobs created within the final three months and preferring to “rework the economy in direction of extra secure and sustainable development”.

– “Redefining Recession” –

Opponents, nonetheless, “condemn Joe Biden’s recession. Economy plunges for 2 straight quarters”, the Republican Party commented on Twitter.

House Republican Leader Kevin McCarthy stated, “The administration has introduced what each American has been feeling for nearly a yr — we’re in a recession.”

Joe Biden during a speech on inflation, July 28, 2022 at the White House (AFP/Mandel NGAN)

Joe Biden throughout a speech on inflation, July 28, 2022 at the White House (AFP/Mandel NGAN)

He additionally accused Democrats of “redefining the recession slightly than restoring a wholesome economy.”

The decline in GDP within the second quarter mirrored decrease enterprise funding and residential purchases by households, the Commerce Department stated. Governments, each federal and native, have minimize their spending.

Consumption, the locomotive of American development, has held up, however due to spending on providers and particularly lease, whose costs have risen with inflation. Purchases of products have decreased.

GDP fell by 0.2% within the quarter if we examine it with the earlier quarter, just like different superior economies.

– “Avoid a semantic struggle” –

So, is the US in a recession or not? The debate which was happening for a number of days, appears to have began once more.

“We ought to keep away from a semantic struggle,” Yellen stated. “Sometimes folks use the time period recession to say it is actually dangerous inflation.”

“We suspect the economy is in recession due to labor market power,” underlined Oxford Economics economists Lydia Busor and Kathy Bostjancic in a observe.

The unemployment price, at 3.6%, may be very near its pre-pandemic degree, the bottom in 50 years, and employers are nonetheless struggling to rent.

A house is for sale in Alhambra, California on May 4, 2022 (AFP / Frederick J. Brown)

A home is on the market in Alhambra, California on May 4, 2022 (AFP / Frederick J. Brown)

Falling GDP “reinforces stagflation (stagnation of exercise and inflation, editor’s observe), and triggers a pink alert for recession,” warned economist Mohamed El-Erian, president of Queen’s College, University of Cambridge, on Twitter. , and financial advisor to insurer Allianz.

Only one company within the United States has the authority to formally decide the length of a recession: the National Bureau of Economic Research (NBER). But his announcement got here months later.

We “think about a collection of indicators,” the NBER particulars on its web site, that additionally monitor “the extent of exercise decline.”

The IMF, for its half, sharply revised downward its development forecast for the US in 2022 and now expects solely 2.3% (when it anticipated 3.7% in April).

The Covid-19 disaster triggered US GDP to contract by 3.4% in 2020, earlier than rebounding to five.7% in 2021.

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