GDP Fell by 0.9% in the Second Quarter, Strong Recession Signal in the U.S

As per the bureau of an economic analysis report, the US economy declined for the second straight quarter from April to June, hitting a widely accepted rule of thumb for a recession.

Gross domestic product fell by 0.9% at an annualized pace for the period, says the advance estimate. That follows a 1.6% contraction in the first quarter which was worse than the Dow Jones anticipation for a gain of 0.3%.

The National Bureau of Economic Research declares decisions and expansions, and likely will not make a judgment on the period in question for months if not longer.

“We’re not in recession, but it’s clear the economy’s growth is slowing,” said Mark Zandi, chief economist at Moody’s Analytics. “The economy is close to stall speed, moving forward but barely.”

However, a second straight negative GDP reading meets a long-held basic view of recession, despite the unusual circumstances of the decline and regardless of what the NDER decides.

The decline in GDP came from a broad swath of factors such as decreases in inventories, residential and non-residential investment, and government expenditure at the federal, state, and local levels. Gross private domestic investment tumbled 13.5% for the three-month period.

The plunging economy has become a significant challenge for the White House. President Joe Biden said, “it’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation.”

Most economists do not expect the NBER to declare an official recession, despite the consecutive quarters of negative growth. Since 1948 the economy of the US has never seen consecutive quarterly growth declines without being in a recession.

However, as per a poll, 65% of registered voters, including 78% of Republicans think the economy is already in a recession.