Fears are growing across the Atlantic and on international markets. The gross domestic product (GDP) of the United States contracted again in the second quarter, by 0.9% at an annualized rate. In the first quarter, GDP had already contracted by 1.6%, according to figures published Thursday, July 28 by the Commerce Department.
With this second quarterly decline in GDP, the US economy meets the classic definition of a technical recession. But many economists, as well as the Biden administration, dismiss the idea of a recession and say there are other more favorable indicators, like jobs; they are based in particular on the official definition of the National Bureau of Economic Studies (NBER).
This organization, considered “the official arbiter of recessions” in the United States, defines a recession as “a significant decline in economic activity spread across the economy, lasting for more than a few months, normally visible in output, employment, real income and other indicators”.
The White House rejects the idea of a recession
Employment growth in the United States averaged 456,700 jobs per month during the first half of the year, which led to a strong increase in wages. Household consumption held up thanks to spending on services.
Nevertheless, downside risks to the economy have increased, as evidenced by the slowdown in housing starts and home sales, while the business climate and consumer confidence have deteriorated in recent months.
The Commerce Department said the decline in GDP reflects declines in business investment and household home purchases. Federal, state and local governments have also curbed spending.
The White House is vigorously rejecting the idea of a recession and is seeking to reassure Americans ahead of the November 8 midterm elections that will decide whether President Joe Biden’s Democratic Party will retain control of Congress. Mr. Biden thus asserted that the American economy was “on the right track”. According to him, “it is not surprising that the economy is slowing as the Federal Reserve acts to reduce inflation”.
On Wednesday, the US central bank once again raised its key rates by 0.75 points, now between 2.25 and 2.50%. US Treasury Secretary Janet Yellen will hold a press conference at 7:30 p.m. Paris time.