The US entered technical recession after the second quarter GDP (Gross Domestic Product) result fell 0.9% from the previous quarter. The statement was made today by the Bureau of Economic Analysis (BEA), an agency of the Department of Commerce.
The drop in the first quarter was 1.6%, the first drop since March 2020 when the covid-19 pandemic was declared. This is considered a technical recession as it is the second consecutive quarter in goods and services produced.
The US Department of Commerce also reported that the consumer spending price index (PCE) rose 7.1% year-on-year between April and June, repeating the performance of the first quarter. PCE core, which ignores food and energy prices, rose 4.4% in the same range after rising 5.2% in the previous quarter.
Yesterday, the US central bank, known by the abbreviation Fed, announced a 0.75 point rate hike. The US has raised interest rates for the fourth time this year, and the trend suggested by the Committee is that the rate should increase further at subsequent meetings.
Recession or not?
Fed Chairman Jerome Powell said yesterday that he does not believe the US economy is in recession.
He estimated that the massive strength of the US job market, with an unemployment rate of 3.6% for four months – practically a state of full employment – would be enough to convince the public that the country was not in recession.
In addition, Powell stressed that he does not believe GDP can be considered a very reliable indicator of whether the country is in recession, but it is not up to the Fed to determine whether this is the case.
The assessment is similar to that of US Treasury Secretary Janet Yellen. In an interview on Sunday, Yellen also used strong hiring and consumer spending figures to argue that the economy is not contracting.
US hiring remained strong in June, with 372,000 jobs created and the unemployment rate remaining at 3.6%. This was the fourth consecutive month of opening over 350,000.
“This is not an economy in recession,” Yellen said. “But we are in a transitional period where growth is slowing, and that is necessary and appropriate.”
*With information from Estadão Conteúdo, Reuters and EFE
source: Noticias
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