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Businees reports have revealed that the United States economy has actually contracted for a second straight quarter between April and June thereby giving rise to more recession fears just months before key midterm elections in a blow for President Joe Biden.
Gross domestic product had also declined at an annual rate of 0.9 percent in the second quarter which came after a bigger drop in the first three months of the year, according to the Commerce Department. Two-quarters of negative growth is commonly viewed as a strong signal that a recession is underway, and a downturn in the world’s largest economy would have global consequences, as well as domestic political costs.
Though President Joe Biden has reiterated that he is confident the United States economy is not suffering a downturn, his critics are sure to seize on the report as proof of the veteran Democrat’s mismanagement of the economy.
After a 1.6 percent decline in the first three months of the year, the report noted drops in government spending at all levels and private investment on goods, including autos, and on residential buildings fell in the second quarter, despite an increase in exports.
The US economy also continues to battle sky-high inflation, as a result of supply chain snarls due to Covid lockdowns, as well as Russia’s war in Ukraine which has sent prices of food and fuel soaring.
Meanwhile, a key inflation measure, the personal consumption expenditures price index, rose 7.1 percent in the latest three months, the same pace as in the first quarter, the data showed. With the labour market showing some signs of cooling and supersized interest rate hikes by the Federal Reserve slowing the economy — the latest coming on Wednesday — many economists say the recession discussion is more a matter of when not if.
And that poses a major political headache for the president, who has seen his approval ratings plummet in recent months as American families struggle to make ends meet due to surging inflation.