The United States of America recorded a 0.9% contraction in its gross domestic product in the second quarter of 2022, following a 1.6% annual decline recorded in the previous quarter.
The downturn in the economy of the world giant is following the significant rise in the prices of goods and services, largely attributed to the global energy crisis, which had spread to other areas of the economy.
Consequently, gross domestic product fell at a 0.9% annualized rate last quarter, the Commerce Department said in its advance estimate of GDP on Thursday. Economists polled by Reuters had forecast GDP rebounding at a 0.5% rate.
Estimates ranged from as low as a 2.1% rate of contraction to as high as a 2.0% growth pace.
The second straight quarterly decline in GDP meets the standard definition of a recession.
But 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, which is generating strong wage gains. Still, the risks of a downturn have increased.
The White House is vigorously pushing back against the recession chatter as it seeks to calm voters ahead of the Nov. 8 midterm elections that will decide whether President Joe Biden’s Democratic Party retains control of the U.S. Congress.
Treasury Secretary Janet Yellen is scheduled to hold a news conference on Thursday to “discuss the state of the U.S. economy.” While labor market remains tight, there are signs it is losing steam.
A separate report from the Labor Department on Thursday showed initial claims for state unemployment benefits decreased 5,000 to a seasonally adjusted 256,000 for the week ended July 23.
Jobless claims remain below the 270,000-350,000 range that economists say would signal an increase in the unemployment rate.
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The Fed on Wednesday raised its policy rate by another three-quarters of a percentage point, bringing the total interest rate hikes since March to 225 basis points.