The new GDP reading from the USA has revealed that the US economy actually shrank for 2 quarters. This means that 1 out of the 2 requirements for an economic recession is now complete!
During the 2nd quarter, the rate of economic decline was 0.6% in the United States of America and has now raised fears of a possible recession!
There is a group of experts that believe that the chance of a 2022 recession is still out of the picture due to robust consumer spending, job growth, and manufacturing. Then there is another group of experts who believe that recession for the USA is just around the corner!
Upward revision of various indicators was witnessed, such as consumer spending, business investment, and federal government spending. On the other hand, a downward revision in housing investment and exports was witnessed, which has offset the previous good news.
Gross Domestic Income which measures the cost and earnings in production, also underwent a downward revision. After the new revision, the new target was set at $305 billion.
Experts believe that the new readings reveal that the US economy has actually weekend during the first half of 2022.
Overall, the data about the US economy is contradictory, but some strength was seen in areas like spending, production, and the labor market.
Another troubling sign is the elevated risk of recession in the US economy, according to the experts. If we look at the federal reverse policy, it has been aggressive as of late to combat the high inflation in the USA.
This will lead to the slowdown of the US economy as the federal reserve is trying to lower the demand. The basic idea is to lower the demand and thus correct the imbalance between the demand and supply. The fed is of the view that it will solve the problem of inflation but let's not forget that it will be at the cost of a slow economy!
If we look at the global scale, the chance of a recession is now around 98.1% which is very high! The last time we got readings like these was during the 2008 financial crisis, which shook the world!