US economy shrinks for second consecutive quarter

US president Joe Biden:"It’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation." Photograph: Cheriss May/The New York TimesThe US economy shrank for a second consecutive quarter, meeting one of the common criteria for a technical recession and complicating the Federal Reserve’s push to stamp out soaring inflation with a string of aggressive rate rises.

The White House has maintained that the US economy remains strong and is not at present in a recession, with Treasury secretary Janet Yellen saying earlier this week she that would “be amazed” if the NBER declared it was. “But even as we face historic global challenges, we are on the right path and we will come through this transition stronger and more secure. Our job market remains historically strong.”

The labour market has not yet shown significant signs of weakness, with the US adding jobs at a healthy pace, averaging about 380,000 a month over the past three months. The unemployment rate also remains historically low at 3.6 per cent, just shy of its pre-pandemic level. Despite the drop in headline GDP, personal consumption, which offers insight into the health of the US consumer, grew 1 per cent in the second quarter, compared with growth of 1.8 per cent in the first three months of the year.

“The inventory data have been very volatile for the past two years. Inventory management has been very difficult, partly because of the supply chain problem and partly because demand for goods was red hot,” said Brian Smedley, an economist at Guggenheim Partners.

Source: Financial Digest (financialdigest.net)

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