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USA confirms technical recession; its economy fell 0.1% in the second quarter

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The US government confirmed this Thursday that the country’s economy fell 0.1% in the second quarter of the year and fell at an annual rate of 0.6%.

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This is pointed out by the third and last official calculation of the economic evolution of the country published by the Bureau of Labor Statistics (BEA), which confirms the technical recession of the world’s largest economy, registering two consecutive quarters of decline -of 0.4% of January to March and one tenth from April to June.

The BEA recalled that these data were produced in a context of high inflation and interest rate hikes to tackle it and with other challenges such as problems in the supply chain, although on the positive side it highlighted the low unemployment rate.

He warned, however, that the effects of all these factors cannot be calculated separately when making the economic estimate.

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According to these statistics, the decline in the second quarter mainly reflects the falls on the investment side -both private and residential- and on the side of public spending, both federal and state or local.

Falls that were partially offset by the increase in exports and consumer spending.

Imports also rose, which negatively affects the calculation of GDP.

The third calculation has not varied from the second because, despite the fact that exports or investment have been revised downwards, on the contrary, household consumption and public spending have been revised upwards.

The two quarters of GDP decline confirm the technical recession of the world’s leading economy, although the government headed by Democrat Joe Biden has insisted at all times that the United States is not in a recession scenario.

The risks, however, remain at a time of great uncertainty such as the current one, marked by high inflation and the effects of the war in Ukraine.

The United States has been trying to contain prices for months and last week the Federal Reserve approved the fifth consecutive rise in interest rates, which are already in a range of between 3 and 3.25%, the highest level in the last 14 years.

The president of the Federal Reserve, Jerome Powell, recognized last week, after announcing the new rate hike of 0.75 points, that this much more restrictive monetary policy will slow down the economy.

Powell admitted that the Fed knows that rate hikes will likely cause “a period of below-trend economic growth”, and that labor market conditions, extremely robust since the post-pandemic recovery began, are sure to worsen.

Experts believe that the effects of the rate hikes will take a few months to be felt in the economy as a whole, and they have no doubt that they will have negative effects on the real estate market or the demand for durable goods.

The inflation rate in the States is going down although it continues to be very high, at 8.3% in August.

Unemployment remains very low, although last month it broke its declining streak in the United States when the rate rose by two tenths to 3.7%.

With information from EFE

Source: Gestion

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