Recession risks intensify in the United States

Risks of recession are intensifying in the United States< /p> UPDATE DAY

The gross domestic product (GDP) of the United States contracted again in the second quarter, which increases the risks of seeing the world's largest economy plunge into recession, a few months from a key election for Joe Biden. 

The GDP contraction is 0.9% annualized, a measure favored by the United States, which compares to the previous quarter and then projects the evolution over the whole year, according to figures published Thursday by the Department of Commerce.

In the first quarter already, it had fallen by 1.6%.

The commonly accepted definition of a recession is two consecutive quarters of declining GDP, but many economists, as well as the Biden administration, argue that the economy is not in recession due to other more favorable indicators, such as employment.

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Joe Biden's Minister of Economy and Finance Janet Yellen will hold a press conference at 1:30 p.m. (5:30 p.m. GMT).

The Commerce Department said the decline in GDP in the second quarter reflected declines in business investment and household purchases of homes. Federal, state, and local governments have also been restraining spending.

Consumption, the engine of US growth, held up. But it is thanks to spending on services, which have seen their prices increase with inflation.

The decline in GDP over the quarter is 0.2% if we simply compare to the quarter precedent, as do other advanced economies.

“Magnitude of decline”

Whether or not the United States plunged into recession: the debate, which had already been raging for several days, will thus be able to get off to a new start.

Only one organization in the United States is authorized to officially determine the periods of recession, the National Bureau of Economic Research (NBER), but this comes with several months of delay.

We “consider a series of indicators”, details on its site the NBER , which also observes “the extent of the decline in activity”.

President Joe Biden said Monday that his country would not experience a recession, and his administration is trying to put out the fire.

Treasury Secretary Janet Yellen assured that no, the world's largest economy was not in recession.

“What a recession really means is a general contraction of the economy. 'economy. And even if this figure is negative, we are not in a recession now,” she pointed out on Sunday.

But the opposition sees it as an attempt to manipulate the numbers. “Scoop for Joe Biden: you can't change reality by arguing over definitions,” reacted the Republican Party.

Slowdown

The rate unemployment rate, at 3.6%, is close to its pre-pandemic level, which was the lowest in 50 years, and employers are still struggling to recruit.

However, “recent indicators of spending and production have slowed,” the Fed conceded on Wednesday.

Consumption, the engine of the American economy, was again surprised by its strength in June. But the amount of expenditure has been inflated by inflation, and consumers, for the same bill, leave with a less full basket.

The IMF has revised its forecast sharply downwards. growth in the United States for 2022, and now only expects 2.3% (when it still anticipated 3.7% in April), advancing “weaker growth at the start of the year”, and the consequences of the inflation.

US GDP contracted 3.4% in 2020 as a result of the COVID-19 crisis, before rebounding 5.7% in 2021.