The headline that many business newsrooms had prepared has been filled. The United States is entering a technical recession by recording a contraction in its gross domestic product (GDP) for two consecutive quarters, according to the preliminary estimate of the Bureau of Economic Analysis (BEA, for its acronym in English) of the Commerce Department published this week. Thursday . Yes in the first quarter of 2022, it recorded a contraction of 1.6% at an annualized ratein the second it was 0.9%, quite far from the 0.4% annualized growth that analysts expected. Even if we cannot yet say that the first power is already in classic recession, the debate is served and uncertainty will increase.
In more European terms, the contraction in US GDP was 0.2% quarter on quarter compared to 0.4% in the first quarter of the year. According to the Ministry of Commerce’s breakdown, personal consumption, the mainstay of the economy, grew from April to June at a rate of 1%registering a deceleration compared to the previous period.
A key indicator of underlying demand that excludes trade and inventory components – inflation-adjusted final sales to domestic buyers – fell at a 0.3% pace in the second quarter, from a 2% rise. % in the previous period.
Along with the slowdown in household spending, the report also shows decline in business investment, government spending and housing. Inventories also weighed on GDP, while a narrower trade deficit weighed on the figure.
Figures from the Commerce Department illustrate how inflation has eroded the purchasing power of americans and the Federal Reserve’s monetary policy tightening weakened interest rate-sensitive sectors, such as housing.
Two-year Treasury yields fell after the report reduced the chances of further aggressive Fed rate hikes, while US stock futures held lower and the dollar erased gains . “Those data increases pressure on the Fed to act less aggressively in rate hikes,” Bankinter analysts pointed out after seeing the preliminary GDP estimate.
The dismal data erases most analysis with the stroke of a pen, which argued that, despite the sharp slowdown, the U.S. economy would hold up on positive ground in the face of evidence such as good employment figureswith an unemployment rate of 3.6% very close to historic lows.
The Fed Chairman himself, Jerome Powellquestioned several times this Wednesday on the recession after raising rates another 75 basis points, ruled out that the US is in recession, as underlying demand remains strong and the economy is unlikely to be in recession. He also discussed labor market conditions, which remain very tight, and the strength of most households’ balance sheets. However, he admitted that the margin for a “soft landing” for the economy is getting narrower.
The contraction supports the live GDP indicator reading from the Atlanta FedWhat had been anticipating a contraction in GDP for weeks. The road to confirming that there is a “real recession” will not be so easy. In the United States, who decides whether or not there is the National Bureau of Economic Research in the United States (NUMBER for its acronym in English) by incorporating into its calculations deeper tendencies in search of clear dynamics.