Washington, Jul 28 (EFE).- The United States economy contracted for a second consecutive quarter as GDP fell at an estimated annual rate of 0.9% between April and June.
The latest report from the Department of Commerce Thursday raises fears of a recession as US GDP, or gross domestic product, which measures the price of goods and services, shrank by 1.6% in the first quarter of the year.
Back-to-back quarters of GDP decline is often used as a benchmark to indicate that a country has entered into a technical recession, although this stance is not shared by the US government.
The decline comes amid soaring inflation — which rose to 9.1% in June, the highest rate since 1981 — and continued global economic disruption due to Russia’s invasion of Ukraine.
The US Federal Reserve System on Wednesday hiked interest rates by 0.75%, to move within a target range of 2.25-2.5%, in a bid to offset inflation.
The Department’s Bureau of Economic Analysis said the “smaller decrease” of GDP from Q1 to Q2 “reflected an upturn in exports and a smaller decrease in federal government spending.”
It added that these data “were partly offset by larger declines in private inventory investment and state and local government spending, a slowdown in PCE (personal consumption expenditure) and downturns in nonresidential fixed investment and residential fixed investment.”
President Joe Biden’s administration, which is set for a tough test in the upcoming midterms, as well as the International Monetary Fund and the Fed had spent days preparing for the gloomy figures, insisting that there are other economic indicators to confirm the US has not entered a recession.
Jared Bernstein, an economic advisor to Biden, on Wednesday told Efe that an economic recession was a concept beholden to many factors.
He argued that two consecutive quarters of GDP contraction did not necessarily indicate a recession, especially if the declines were small. Bernstein added, however, that he did not want to paint a “too friendly picture” of the situation.
In its global economic outlook, the IMF on Tuesday downgraded its forecast for US economic growth to 3.2% in 2022 and 2.9% in 2023, a reduction of 0.4% and 0.7% compared to its previous report in April.
Speaking to Bloomberg, IMF chief economist Pierre-Olivier Gourinchas warned a “small shock” could be enough to knock the US into recession next year.EFE