US economy shrinks again ringing recession alarms

Image source, Getty Images

The US economy has shrunk for the second quarter in a row, which is considered an economic recession in many countries.

In the US, that is not the case.

In the three months to July, the contraction was at an annual rate of 0.9%.

The prices of groceries, petrol and other basics are rising at a faster rate than in the past.

As the US central bank raises borrowing costs to try to cool the economy and ease price pressures, fears are rising that a recession is about to start.

Faced with sinking public confidence, US President Joe Biden has tried to make the case that the economy remains sound, noting that the unemployment rate remains at a low 3.6%

He told reporters that the economy would not be in a recession. The Republicans accused the White House of trying to redefine the term.

They said that the White House recession would not reduce Americans' suffering.

The US economy contracted in the first three months of the year. The decline inGDP was blamed on quirks in trade data.

Consumer spending grew at a slower pace as people spent more on healthcare, but less on groceries.

"Coming off of last year's historic economic growth - and regaining all the private sector jobs lost during the pandemic crisis - it's no wonder that the economy is slowing down as the Federal Reserve acts to bring down inflation," Mr Biden said on Thursday.

We will come through this transition stronger and more secure even as we face historic global challenges.

The National Bureau of Economic Research is a group of academics who make the official declaration of recession. He said he didn't believe a recession started at the beginning of the year. He wasn't as confident after that.

He said that things have slowed down so he isn't saying that everything is great. The odds of a recession going forward are much higher than for a random year.

The US's inflation rate in June was 9.1%, the fastest pace of price appreciation in more than four decades.

The US central bank responded to the problem with another large increase to its key interest rate.

By making borrowing costs more expensive, the Federal Reserve hopes to reduce spending on items such as homes and cars in order to ease the pressures on prices. Economic activity goes down when demand is lower.

Consumer confidence has fallen, the housing market has slowed, and business activity has contracted for the first time since 2020. The US stock market has fallen since the beginning of the year, and companies such as Meta, the owner of Facebook, and GM have said they plan to slow hiring. Job cuts have been announced by some firms.

Image source, Sasan Kasravi

In June, Sasan Kasravi lost his job as a speech and debate coach.

He said he wasn't concerned about facing a long bout of joblessness. Less than 15% of Americans think economic conditions in the US are good, according to a survey.

He says that everyone is waiting for the war in Ukraine to end but that's not going to resolve any of the inherent flaws.

We're all wondering if this is the thing that causes it to plunge.

The chairman of the Federal Reserve said this week that he didn't think the US economy was in a recession, but he noted that the economy had begun to slow and more was needed to bring inflation back to normal.

It's not clear how severe the expected downturn will be.

Laura Veldkamp is a finance professor at the Columbia Business School. She believes policymakers have learned from that experience.

The surge in energy prices from the war in Ukraine raises risks from abroad. The US isn't the only one raising interest rates.

Many other countries have more serious problems and that could spill over to us.

The burst of the dot com bubble in 2001 would not be considered a recession under the two-quarters-in-a-row-of-contract rule.

As more data comes in, estimates of output in the US economy are often updated. There are cases of recessions in the UK.

He said that politics has nothing to do with it.

The recession in the US is not defined by a mechanical rule. There are people who are going to be cynical about it.