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US economy contracts once more, raising recession concerns

(BBC) The US economy has contracted for the second consecutive quarter, a development that in many other nations would be regarded as an economic downturn.

In contrast, the US uses extra information to make that choice.

However, the shrinkage, which occurred at an annual pace of 0.9 percent in the three months leading up to July, has received a lot of attention as economic worries intensify.

The cost of food, gas, and other necessities is rising at a rate not seen since 1981.

Fears are growing that a recession is on the horizon, if it hasn’t already, as the US central bank aggressively increases borrowing prices to try to cool the economy and reduce pricing pressures.

US President Joe Biden has attempted to argue that the economy is still healthy in the face of declining public confidence by pointing out that the unemployment rate is still a low 3.6 percent and hiring has remained steady.

He assured reporters this week that the economy “was not going to be in a recession” prior to the release of data from the Commerce Department. His adversaries in the Republican party then claimed that the White House was attempting to redefine the term.

They claimed that the “White House recession rebrand” would not lessen the pain of Americans.

The US economy contracted at an annual rate of 1.6 percent in the first three months of the year. Economists at the time ascribed the fall to anomalies in trade data.

Nevertheless, the data released today indicated a more pronounced slowdown, with growth being constrained by falls in the property market, business investment, and government spending. Consumer expenditure increased by 1% annually as consumers increased their spending on products and groceries while decreasing their spending on healthcare, lodging, and dining out.

Professor Jeffrey Frankel of Harvard previously sat on the committee of the National Bureau of Economic Research, a team of academics tasked with officially announcing a recession. Noting the robust job growth, he asserted that he did not believe a recession began at the beginning of the year. But after that, he lacked as much assurance.

“Things have already slowed down, so I’m not saying that everything is great,” he said. “Odds of a recession going forward are substantially higher than for a random year.”

Prof. Frankel emphasized the significance of taking the labor market into account when determining the beginning of a recession, noting that some downturns, such as the burst of the dot com bubble in 2001, would not qualify as recessions under the two-quarters-in-a-row rule, despite the significant loss of jobs.

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