The Gross Domestic Product (GDP ) From United States had an annualized drop of 0.9% in the second quarter of 2022 compared to the same period in 2021, the Center for Economic Analysis reported on Thursday (28).
The disclosure contradicted the market’s expectation, which projected a growth of 0.5%. The data is considered preliminary, and will be reviewed in August and September. The GDP had down 1.6% in the first quarter this year.
Revisions are often the norm rather than the exception, as the Commerce Department repeatedly refines its calculations as new information becomes available. About a third of initial GDP figures rely on statistical extrapolations and assumptions in the absence of hard data, according to the San Francisco Federal Reserve.
With the result of two consecutive setbacks, the country enters the so-called recession technique. However, the official declaration of this scenario is only made in the United States by the Center for Economic Analysis, which has not yet occurred.
The center defines a recession as “a significant decline in economic activity spread throughout the economy, lasting more than a few months, typically visible in output, employment, real income, and other indicators”.
Despite the declines in GDP, the country’s labor market remains heated, with job creation and high wages, and the country’s unemployment rate remains at levels considered to be full employment.
Released on Thursday, the number of weekly unemployment claims in the United States was 256,000, slightly above the 253,000 expected by the market.
The market was already betting that the country’s economy would go into recession, as the United States faces the highest inflation in over 40 years and the consequent cycle of high interest rates by the Federal Reserve to contain it, in the process slowing the country’s economy.
However, signs of contraction have appeared earlier than expected by most investors. The expectation now is that, with the economy already slowing, the Fed will moderate the upswing cycle, with increases lower than initially expected to avoid worsening the economic situation.
On Wednesday (27), the Fed raised interest rates by 0.75 percentage point, but the mayor, Jerome Powell, signaled that the next increases can be smaller depending on the data on the economy.
On the same day, he said the latest interest rate hikes were big, but not fully felt by the country’s economy. According to Powell, the US economy remains “resilient”.
The Fed’s current expectation, he said, is for a period of below-trend growth due to monetary tightening, something “necessary to achieve price stability.”
“Recession is a widespread decline across many sectors of the economy, and that doesn’t seem to be the case right now,” he said. The economic slowdown in the second quarter was “notable,” but the economy is still on track for growth, according to Powell.
After the disclosure, the President of the United States Joe Biden said in a statement that “it is no surprise” that the country’s economy is slowing as the Fed works to reduce inflation.
“Even as we face historic global challenges, we are on the right track and will make it through this transition stronger and safer. Our job market remains historically strong, with unemployment at 3.6% and over 1 million jobs created in the second quarter alone. Consumer spending continues to grow,” Biden said.
He said his economic plan is “focused on reducing inflation, without giving up all the economic gains we’ve made.”
*With information from Reuters
Source: CNN Brasil
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