US GDP falls for second straight quarter, stoking recession fears

The American economy has shrunk for the second consecutive quarter amid growing concern the country could be slipping into a recession, according to new federal data.

The Commerce Department data released on Thursday showed American gross domestic product (GDP) shrinking between April and June, marking the second-straight quarter of economic contraction, The Hill reported.

The US Commerce Department’s first estimate of economic growth over the previous three months showed GDP falling at a yearly pace of 0.9 percent in the second quarter.

This means that the US economy would shrink by nearly 1 percent if the second quarter’s pace of growth lasted for an entire year.

“The US economy is struggling,” wrote Scott Hoyt, senior director at Moody’s Analytics.

“We now expect growth to struggle to reach potential both this year and next. However, we don’t believe the economy is in a recession,” he continued.

This comes after the IMF said on Tuesday that the United States has only a slim chance of avoiding an economic downturn given the many risks it faces.

"It's a very narrow path," IMF chief economist Pierre-Olivier Gourinchas said. "The current environment suggest that the likelihood that the US economy can avoid a recession is actually quite narrow,” AFP reported.

The economist warned that even a "small shock" could tip the US economy into recession.

On Monday, renowned US economist Nouriel Roubini predicted a severe recession in the United States as the government tries to curb soaring inflation.

Roubini told Bloomberg that a combination of soaring inflation coupled with stagnation would lead to an economic recession in the US and elsewhere.

According to the government’s June statistics, inflation surged to a new four-decade high in the United States, as prices continue to climb at the fastest pace across many sectors of the economy.

In this regard, Roubini, who is a New York University professor and chief executive of Roubini Macro Associates, issued a warning citing various reasons for an imminent recession.“I think there are many reasons why we are going to have a severe recession and a severe debt and financial crisis.”

The US economy is in a period of stagflation (low growth and high inflation), while debt ratios are “historically high,” Roubini pointed out.

Several economists said GDP would fall for a second consecutive quarter as the economy faced more pressure from high inflation, rising interest rates, slowing job growth, falling home sales and other headwinds.

Experts have become expressed fears that the economy will slow down into a recession after GDP fell at an annualized rate of 1.6 percent in the first quarter.

“The headline of a second straight decline in real GDP highlights the abrupt change in the path of the U.S. economy, but the ongoing strength in the job market and other signs of growth make it unlikely that this will be categorized as a recession at this point,” said Mike Fratantoni, chief economist for the Mortgage Bankers Association, in a Thursday analysis.

US is not in recession or pre-recession: White House

The United States is not currently in a recession or in a "pre-recession," the White House said on Wednesday as the Federal Reserve Board raised interest rates to try to fight inflation, according to Reuters. 

White House press secretary Karine Jean-Pierre declined to comment on Fed monetary policy after the Fed raised rates by three quarters of a percentage point.

US has 'very narrow path' to avoid recession: IMF

The United States has only a slim chance of avoiding an economic downturn given the many risks it faces, the IMF said on Tuesday.

US President Joe Biden and White House officials have downplayed the recession fears and blamed the Federal Reserve for the unprecedented inflation.

"We're not going to be in a recession, in my view," Biden told reporters on Monday. "The employment rate is still one of the lowest we've had in history. It's in the 3.6 (percent) area. We still find ourselves, the people, investing."

"My hope is we go from this rapid growth to a steady growth. And so, we'll see some coming down. But I don't think we're going to -- God willing -- I don't think we're going to see a recession," he continued.

US Treasury Secretary Janet Yellen earlier this month rejected claims that the American economy was in recession, saying the nation was instead going through a “necessary and appropriate” slowdown.

News regarding the US recession comes as a slew of economic reports will be released this week that will shed light on an economy currently besieged by rampant inflation and threatened by higher interest rates. The data will cover sales of new homes, consumer confidence, incomes, spending, inflation, and overall output.

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