From April to June 2022, the gross domestic product of the United States decreased by 0.9% compared to the same period in 2021.
Such data on Thursday, July 28, reported the Bureau of Economic Analysis of the US Department of Commerce.
An even more pessimistic assessment was presented the day before by the Federal Reserve Bank of Atlanta.
According to his experts, in the second quarter the US economy shrank by 1.2%.
Note that from January to March 2022, the dynamics of US GDP was also negative.
Then the indicator decreased by 1.6% in annual terms.
Thus, the economic recession in the United States continues for two quarters in a row.
Such a situation is traditionally considered to be the beginning of a technical recession, Alexey Fedorov, an analyst at the TeleTrade information and analytical center, told RT.
“A recession is one of the stages of the macroeconomic cycle, which is preceded by an economic boom.
After the economy reaches its peak, there is a cyclical downturn and depression, otherwise known as a crisis.
The last time the United States faced this was back in 2008,” Fedorov explained.
A consistent decline in GDP over two quarters in the United States was also observed in the first half of 2020.
However, at that time the decline was caused by the consequences of the coronavirus pandemic and was not cyclical, the expert explained.
According to him, in recent years, the United States has managed to avoid a new cyclical crisis several times.
In particular, this became possible due to the large-scale tax cuts by Donald Trump in 2017-2018 and pumping money into the financial system to stimulate demand in 2020-2021.
Nevertheless, attempts to delay the crisis always lead only to acceleration of inflation and a deeper recession in the economy in the future, Fedorov stressed.
In June 2022, the inflation rate in the United States rose to 9.1% in annual terms.
The achieved growth rates of consumer prices for goods and services in the country have become the highest since November 1981, according to the materials of the US Department of Labor.
“The beginning crisis in the United States and record inflation in 40 years can be called retribution for the unaffordable luxury of American politicians, especially in 2020-2021, when the money supply in the United States was increased by more than 35%.
Such a volume of printed money has become a historical record and an inflationary bomb under the economies of the United States and the world as a whole, ”Aleksey Fedorov suggested.
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© Yuji Sakai
In addition to the acceleration of inflation, the observed decline in US GDP may be due to the increased trade deficit and higher taxes after Joe Biden came to power.
This opinion was expressed by Olga Lebedinskaya, Associate Professor of the Department of Economic Statistics of the Plekhanov Russian University of Economics.
Although, according to her, it is too early to talk about the real onset of a crisis in the United States, the indicators of the US securities market do indicate the beginning of a recession.
“There is already an inversion in the stock market, where short-term bond yields exceed long-term yields.
This is a sure sign that the US is in recession.
At the same time, the situation is aggravated by the debt crisis, ”said the interlocutor of RT.
The United States government debt now stands at about $30.6 trillion, or 124% of GDP.
At the same time, the total debt of the population, companies, financial institutions and the US government is now equivalent to 359% of GDP, that is, almost 3.6 times the size of the US economy.
Such data are presented in the materials of the Institute of International Finance and the Ministry of Finance of the country.
stage of denial
Curiously, since the beginning of the week, the US authorities have repeatedly stated that there are no risks for a recession in the US.
Thus, United States President Joe Biden ruled out such a development of events, since unemployment in the country remains at a historically low level (3.6%), and investment processes in the economy continue.
“Hopefully, we will move from this rapid growth to stable growth.
We will see some decline.
But I think that we, God willing, will not have a recession, ”Biden emphasized.
He repeated this position on July 28, ending his speech to the press at the White House by listing data on the number of jobs created and on business investment in the American economy.
“In my opinion, this does not look like a recession,” the head of state said and left the premises, ignoring the questions of journalists.
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© Chris Kelponis-Pool
Treasury Secretary Janet Yellen and US Federal Reserve Chairman Jerome Powell also voiced a similar position.
According to TASS, the heads of both departments noted that the growth of the American economy is indeed slowing down, but the labor market remains strong, many industries feel good, so there is no talk of a recession.
However, specialists of the International Monetary Fund adhere to the opposite opinion.
As IMF Chief Economist Pierre-Olivier Gourinsha said on July 26, the likelihood that the United States will be able to avoid a recession is rather small.
Nouriel Roubini, a well-known American economist and emeritus professor at New York University, also expressed his concern about the situation.
According to Bloomberg, the specialist does not exclude the possibility of a deep recession in the US economy.
Note that earlier the scientist was one of the first to predict the onset of the global financial crisis of 2008.
“There are many reasons why we are facing a severe recession, as well as a severe debt and financial crisis.
The idea that it (the recession. -
RT
) will be short and superficial is completely out of touch with reality, ”said Roubini.
In his opinion, the situation is seriously complicated by the current policy of the US Federal Reserve.
Since March 2022, the Fed has already raised its interest rate four times to combat inflation (from 0-0.25 to 2.25-2.5% per annum) and intends to continue raising it in the coming months.
The actions of the US regulator should lead to an increase in interest on loans and bank deposits in the US, which will allow to cool economic activity in the country and thus contain further price increases.
At the same time, the Fed's policies risk further weakening the economy and more costly debt servicing.
“During previous recessions, like the last two, we had massive monetary and fiscal easing.
This time we are entering a recession by tightening monetary policy.
We do not have budgetary space,” added Nouriel Roubini.
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© Kent Nishimura / Los Angeles Times
According to Alexei Fedorov, in the near future the leadership of the United States will probably continue to deny the fact of the onset of a recession.
At the same time, the analyst believes that such statements by the authorities may further reduce the chances of the Democratic Party in the fall congressional elections.
“Besides, if Jerome Powell were to announce a recession in the economy now, the Fed would no longer be able to raise the rate.
And this is an inflationary impasse that could lead to a massive panic in the US market.
That is why Powell, along with Janet Yellen, will continue their line of non-recognition of the recession, just as they did not notice record inflation just six months ago, calling it temporary, ”the expert emphasized.
The next Fed rate meeting is scheduled for September 20-21.
According to Alexei Fedorov, by this time the negative trends in the economy may become openly crisis.
According to Olga Lebedinskaya, in order to save a number of sectors, it would be possible to lower the interest rate again, but in this case, inflation will have to be sacrificed.
“Raising the rate is a quick and easy way to bring down inflation and has proven to be effective in Russia.
However, in the US, it may not work, but only exacerbate the problems of the now real sector of the economy and the millions of unemployed.
In the United States, the role of the mortgage and debt markets is great.
A crisis in this sector can instantly spread to the entire economy.
In order to save the mortgage and debt markets, rates must turn back, and this is completely unreasonable for inflation, ”concluded Lebedinskaya.