Posted 1 year ago
The U.S. economy shrunk in the second quarter, due to a decline in business spending and consumer spending growing at its slowest pace in two years. While the second straight quarterly decline in gross domestic product reported by the Commerce Department on Thursday largely reflected a more moderate pace of inventory accumulation by businesses due to ongoing shortages of motor vehicles, the economic profile was weak, with exports the only bright spot.
"The economy is highly vulnerable to slipping into a recession," said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. "That might discourage the Fed from ramming through another large rate hike in September."
The US economy shrank 1.3% in the first half, satisfying the definition of a 'technical recession.' But economists say the economy is not in recession using broader measures of activity. President Joe Biden released a statement saying:
Coming off of last year’s historic economic growth – and regaining all the private sector jobs lost during the pandemic crisis – it’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation
The President continued:
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.
The National Bureau of Economic Research, the official arbiter of recessions in the United States defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators."
Job growth averaged 456,700 per month in the first half of the year, while domestic demand continued to grow.
"There is without doubt an underlying slowdown in domestic demand in evidence here," said Brian Coulton, chief economist at Fitch Ratings in New York. "But this number does not signal the early arrival of the inflation and Fed-tightening induced recession that markets have recently been focused on."
Topic: US News
Tags: Joe Biden Recession US Recession GDP