The US economy is in a state of ‘technical recession’ for the first time in two years. Although the prevailing view is that it is not yet an official recession and that it is difficult to see it as a real recession, fears in the market are expected to increase.
The U.S. Department of Commerce announced on the 28th (local time) that the gross domestic product (GDP) grew at an annualized rate of -0.9% in the second quarter.
As a result, the US economy has reached the standard of a technical recession in the market, which is defined as negative growth for the second quarter of last year and negative growth for two consecutive quarters.
It is the first time in two years that the U.S. economy has entered a recession on this basis since the first and second quarters of 2020, when the novel coronavirus infection (COVID-19) pandemic began. At that time, it was a ‘real’ recession, with GDP declining by more than 30% in the second quarter alone.
However, the official economic downturn is determined by the National Institute of Economic Research (NBER), and the Joe Biden administration and the US Federal Reserve (Fed) are still on the brink of negative growth for two consecutive quarters on the basis of a strong labor market. It cannot be viewed as a recession.
The New York Times reported that most economists do not yet meet the official definition of a recession when judging by aggregate economic indicators such as income, spending and employment.
The negative growth of the US economy in the second quarter is analyzed, as in the first quarter, due to a decrease in inventory investment by private companies. The decline in inventory investment was found to have dragged down GDP by 2% points in the second quarter.
According to the Department of Commerce’s Bureau of Economic Analysis (BEA), declines in residential fixed investment, federal spending, state and local government spending, and non-residential fixed investment, in addition to business investment, are cited as the cause of the negative growth.
On the other hand, the trade balance, which was the ‘main culprit’ of the unexpected negative growth in the first quarter, improved somewhat thanks to an increase in exports. Personal consumption expenditure continued to increase, but the rate of growth slowed to 1% in the aftermath of inflation.
Nevertheless, the US media predicted that the fear of ‘R’ would increase even more in the market as the feared technological recession was rapidly approaching.
However, the New York stock market remained flat in after-hours trading before the opening day, largely reversing the decline, fueled by investor expectations that the US central bank, the Federal Reserve, could slow rate hikes to prevent a recession. have.
The prevailing view is that the worst inflation in more than 40 years and the Fed’s continuous steep rate hikes to contain it will eventually cause an economic slowdown or recession.
The International Monetary Fund (IMF) recently downgraded its growth forecast for the US this year to 2.3%, down 1.4 percentage points from the previous year, and warned of a possible economic slowdown.
The U.S. growth rate is announced three times: a preliminary figure, a tentative figure, and a fixed figure. Today’s announcement is preliminary and may be revised in the future.