Joe Biden wants to believe that the country is not in recession and is preparing to garner an important legislative victory for the first time in a year.
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American activity fell in the second quarter at an annual rate of 0.9 % compared to the first quarter. This negative performance follows the decline in the activity of 1.6 % in the first quarter.
Usually, when the gross domestic product (GDP) fell back for two consecutive quarters, each speaks of recession in the United States. Except that the case is a major political issue for Joe Biden, who focused his political message on the growth found after the Pandemic of Covid and faces very delicate mid-term elections in November. Before the publication of the growth figure, Thursday, July 28, the Democratic president turned on a counterflow, and explained that the country was not in recession. He was entitled to the help of the president of the Fed, Jerome Powell, who also estimated, on Wednesday, that the country was not, having in particular regarding the excellent attire of the job market.
Result, all of America debates the definition of a recession. This state of the economy is officially proclaimed ex post, by a panel of eight economists from the National Bureau of Economic Research. It is defined as a significant drop in activity, distributed throughout the economy for several months. The panel takes into account factors such as employment, production, retail sales and household income.
In detail, the second trimester figure is less negative by its magnitude than the first, but offers a less pleasing image because it reveals a deterioration of the two pillars of the American economy, consumption and investment. In the first quarter, the decline in activity had been caused by the deep deterioration of foreign trade, which rebounded. On the other hand, this quarter, companies have heavily destocked products clearly unsuitable for consumers, which reduces growth. Above all, the investment is struck, especially for residential real estate (-14 %) and businesses (-3.9 %), while consumption only works on one leg, that of services. The Americans go out in restaurants and travel, which increases service consumption of 4.1 % (compared to 3.1 % in the first quarter). On the other hand, they abandon the goods purchased massively during the COVID (down 4.4 % against an increase of 0.3 % in the first quarter). As a result, consumption has been accused from 1.8 %to 1 %, while government spending continues their reflux, especially at the unrelated federal level (-10.5 %).
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