The President of the United States said on Thursday that his country’s economy was “on track”, despite GDP figures showing it had shrunk for the second straight time, stoking fears of a recession.
“It’s no surprise that the economy is slowing as the Federal Reserve acts to reduce inflation,” Joe Biden said in a statement, adding that the United States was “on the right track.”
His remarks come as US gross domestic product (GDP) was shown to contract again in the second quarter of 2022, raising the risk of a recession in the world’s largest economy.
US GDP fell 0.9% between April and June, having already shrunk 1.6% in the first quarter of this year.
Economists generally define a recession as two consecutive quarters of negative GDP growth.
However, the Biden administration – which faces a key midterm election soon – has asserted that the economy is not in recession as other key economic indicators, such as jobs, remain strong. .
Stocks fell on Thursday as investors reacted to news that the US economy had contracted, with the S&P 500 down 0.4% and the Dow Jones Industrial Average down 0.4%.
Last quarter’s GDP report highlighted weakness in the US economy. Consumer spending slowed as North Americans purchased fewer goods. Business investment fell. Inventories fell as businesses slowed their restocking of shelves.
Rising interest rates, a consequence of the Federal Reserve’s recent round of rate hikes, have undermined home construction, which has fallen at an annual rate of 14%. Public spending also fell.
The report comes at a critical time for Biden and the United States.
The Federal Reserve is trying to slow the nation’s economy in a bid to fight inflation without tipping it into a recession, as consumers and businesses struggle under the weight of the inflation crackdown and rising borrowing costs.
On Wednesday, the Fed raised its benchmark interest rate by three-quarters of a point for the second straight time in a bid to beat the worst inflation spike in four decades.
In the United States, surging inflation and fears of a recession have eroded consumer confidence and raised anxiety about the economy, which is sending frustrating and mixed signals.
As November’s midterm elections approach, American discontent has eroded Biden’s public approval ratings and could increase the likelihood that Democrats will lose control of the House and Senate.
Apart from the United States, the global economy as a whole is also struggling with high inflation and weakening growth, especially after Russia’s invasion of Ukraine sent oil prices soaring. energy and food.
Europe, highly dependent on Russian natural gas, appears particularly vulnerable to a recession.