The US economy contracted 0.9% in the second quarter. This is the second fall in a row, which may indicate a recession

The US economy contracted between April and June for the second consecutive quarter, at a rate of 0.9% on an annual basis, raising fears that the country was entering a recession.

The decline announced by the Commerce Department on Thursday in gross domestic product – the broadest measure of the economy – followed an annual decline of 1.6% between January and March. Consecutive quarters of lower GDP are an unofficial, if not definitive, indicator of stagnation.

The report comes at a critical time: Consumers and businesses have been struggling with inflation and rising borrowing costs. On Wednesday, the Federal Reserve raised its benchmark interest rate by three-quarters of a point for the second time in a row as part of its efforts to beat the worst rise in inflation in four decades.

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The Fed hopes to get soft landing Extremely challenging: an economic slowdown is able to curb price hikes without causing a recession.

Federal Reserve Chairman Jerome Powell and several experts said that while the economy is showing some weakness, they suspect it is going into a recession. Many of them, in particular, point out that The job market is still going strong. With 11 million jobs open and an unusually low unemployment rate of 3.6%, suggesting a recession, if at all, remains a long way off.

The first three government estimates of April-June quarter GDP on Thursday represented a sharp weakening of the 5.7% growth of the economy last year. It was the fastest expansion in a calendar year since 1984, reflecting the strength with which the economy recovered from the short and brutal pandemic downturn of 2020.

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But since then, the combination of higher prices and increased borrowing costs has led to huge losses. The Labor Department’s Consumer Price Index rose 9.1% in June from a year earlier, a pace not seen since 1981. Despite broad wage increases, Prices rise faster than wages. In June, average hourly wages, once adjusted for inflation, fell 3.6% from the previous year, marking the 15th consecutive year-on-year decline.

Rising inflation and fears of a recession have eroded consumer confidence and increased public concern about the economy, which is sending both frustrating and conflicting signals.

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With the midterm elections looming in November, American discontent lowered President Joe Biden’s public approval ratings and increased the likelihood that Democrats would lose control of the House and Senate.

Consumer spending continues to grow. But Americans are losing confidence: Their assessment of economic conditions within six tables has reached its lowest level since 2013, according to the Conference Board research group.

Recession risks are rising as federal policymakers have launched a campaign of rate hikes likely to continue into 2023. The Fed’s increases have already sent card and auto loan rates up, and it doubled the average rate on 30-year fixed-rate mortgages last year, to 5.5. Home sales, which are particularly sensitive to changes in interest rates, fell.

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Although the economy is posting a second consecutive quarter of negative GDP, many economists consider it not a recession. The most widely accepted definition of a recession is that of the National Bureau of Economic Research, a group of economists whose Business Cycle Data Committee defines a recession as “a significant decline in economic activity that spreads throughout the economy and lasts longer than a few months.”

The committee weighs a number of factors before publicly declaring the death of an economic expansion and the birth of a recession, and often it does so long after it has occurred.

This week, Walmart, the nation’s largest retailer, lowered its earnings forecast, saying higher gas and food prices are forcing shoppers to spend less on many discretionary items, such as new clothes.

The manufacturing sector is also slowing down. US factories enjoyed 25 straight months of expansion, according to the Institute for Supply Management’s Manufacturing Index, although supply chain bottlenecks have made it difficult for factories to meet orders.

But now, the factories’ boom is showing signs of stress. The The manufacturing index (ISM) fell last month to its lowest level in two years. New orders decreased. Factory employment declined for the second month in a row.

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