The US economy has shrunk for the second consecutive quarter, fitting the traditional criteria for a recession.
Following a loss of 1.6 percent in the first quarter, the second quarter’s gross domestic product fell by 0.9 percent, the Commerce Department reported on Thursday.
The informal and generally accepted definition of a recession is two consecutive quarters of negative GDP growth.
The White House, however, has been ferociously refuting the idea that a recession would be defined as six consecutive months of economic loss by providing announcements and briefings to promote their argument that the economy is still robust.
President Joe Biden assured reporters on Monday that a recession was not imminent.
According to legal requirements, the National Bureau of Economic Research must formally declare a recession.
A recession is described as “a considerable fall in economic activity that is spread across the economy and lasts more than a few months” by the group’s Business Cycle Dating Committee.
Before publicly announcing the end of an economic growth and the beginning of a recession, the committee considers a variety of criteria, and it frequently succeeds in doing so after the fact.
Prior to the release of Thursday’s GDP report, Federal Reserve Chair Jerome Powell again refuted the notion that the nation is in a recession.
In a news conference on Wednesday, Powell said, “I do not think the United States is currently in a recession and the reason is that there are too many sections of the economy that are performing too well.”
Powell had just increased interest rates by 0.75 percentage points.
In an effort to combat growing inflation, the Fed quickly increased interest rates in 2022, moving from near zero to a target range of 2.25 to 2.5 percent.
However, higher rates also slowed economic development.
The increased rates have so far been unable to control inflation, which peaked at 9.1 percent in June.
The central bank must make difficult judgments on whether to hike rates more and risk tipping the economy further into decline. Recession signs are now blinking.