The US economy has shrunk for the second quarter in a row, triggering one definition of a “technical recession”, as record-high inflation and aggressive interest rate rises from the Federal Reserve slowed business and housing demand.
The nation's gross domestic product fell at an annual rate of 0.9 per cent in the second quarter, after falling at annual rate of 1.6 per cent in the previous quarter, the Commerce Department reported on Thursday.
While a second consecutive quarterly decline in GDP meets the standard definition of a “technical recession”, the National Bureau of Economic Research is the official arbiter of recessions in the US.
It defines such an event as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income and other indicators”.
The White House is vigorously pushing back against the recession chatter as it seeks to calm voters before the November 8 midterm elections that will decide whether President Joe Biden's Democrats retain their razor-thin control of the US Congress.
“There's no doubt we expect growth to be slower last year than last year for the rapid clip we had, but that's consistent with the transition to a stable steady growth and lower inflation,” Mr Biden said.
He added that a strong job market, consumer spending and business investment are all signs of economic progress.
Earlier this week, Mr Biden told reporters: “We're not going to be in a recession in my view.”
Pointing to the nation's low unemployment rate, he said: “My hope is that we go from this rapid growth to steady growth and we'll see some coming down. But I don't think we're, God willing, going to see a recession.”
Treasury Secretary Janet Yellen argued against defining a recession as two consecutive months of negative growth, instead characterising a true recession as “broad-based weakening of the economy”.
“That is not what we're seeing right now,” she told reporters at a news conference.
Job growth averaged 456,700 positions per month in the first half of the year, generating strong wage gains. Still, the risks of a downturn have increased. Homebuilding and house sales have weakened while business and consumer sentiment have softened in recent months.
“Coming off of last year’s historic economic growth — and regaining all the private sector jobs lost during the pandemic crisis — it’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation,” Mr Biden said in a statement.
“My economic plan is focused on bringing inflation down, without giving up all the economic gains we have made.”
The GDP report comes at a time when consumers and businesses are facing soaring prices due to inflation. The Fed on Wednesday announced it was raising its interest rates by 75 basis points to mitigate the price increases.
Fed Chairman Jerome Powell told reporters that he did not believe the US was in a recession, pointing to a strong labour market, among other economic factors.
Agencies contributed to this report