The US gross domestic product posted its second straight quarterly decline in an alarming development that economists widely view as an indicator of economic recession.
The economy shrank by 0.9% in the second quarter, contracting despite economists’ expectations of muted 0.3% growth.
The downtick followed a first-quarter report in which the US economy posted a surprise decline of 1.6%.
The GDP report was released one day after the Federal Reserve hiked its benchmark interest rate by three-quarters of a percentage point for the second straight month to cool inflation, which hit 9.1% in June.
The Fed’s sharp rate hikes have exacerbated investor concerns about its ability to engineer a “soft landing” by taming inflation without causing an economic downturn.
Fed Chair Jerome Powell indicated on Wednesday that he does not see the US economy in a recession at present.
“I do not think the US is currently in a recession and the reason is, there’s just too many areas of the economy that are performing too well,” Powell said at a press conference.
Treasury Secretary Janet Yellen has also rejected that notion that a recession is already underway.
“You don’t see any of the signs now,” Yellen said. “A recession is a broad-based contraction that effects many sectors of the economy. We just don’t have that.”
Yellen added that she would be “amazed” if the National Bureau of Economic Research declares a recession in the near future.
“I would be amazed if the NBER would declare this period to be a recession, even if it happens to have two quarters of negative growth,” she said. “We’ve got a very strong labor market. When you’re creating almost 400,000 jobs a month, that is not a recession.”
Meanwhile, the White House attempted damage control ahead of the report’s release. The Biden administration released a blog post arguing a recession was “unlikely” even if GDP declined for the second straight quarter.
[Written in collaboration with other media outlets with information from the following sources]
