The first reading of the US GDP development came today, to reinforce economists’ fears of the world’s largest economy falling into recession, which means that the economy will shrink (ie, achieve negative growth) in two consecutive quarters.
The US economy contracted by 1.6 percent in the first quarter of this year on an annual basis, against the backdrop of severe inflation that the country is experiencing, which has undermined consumer spending, in addition to crises related to supply chain problems, reduced government aid and the return of the spread of Corona virus infections.
A series of US interest rate increases since the beginning of the year has hampered business investment and housing demand, contributing to the economy’s contraction.
Although the common rule of thumb for recessions is negative economic growth in two consecutive quarters, the official determination of the ends and beginnings of business cycles in the United States is made by a group of academics at the National Bureau of Economic Research, but this is a few months late.
The US central bank raised interest rates by 75 basis points on Wednesday for the second time in a row, in quick steps by monetary policy makers to curb the highest inflation rates in more than 40 years in America.
And US President Joe Biden said last Monday that “his country will not witness a recession” and that his administration is working to solve the problem before it arises.
On Sunday, US Treasury Secretary Janet Yellen said that the US economy is not in a recession.
She added that the recession “is a generalized contraction of the economy…even if the GDP in the second quarter is negative, we are not currently in a recession.”
However, the opposition sees this as an attempt to manipulate the numbers. And the Republican Party directed to Biden by saying, “You can’t change the truth by having a discussion about definitions.”
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