NEW DELHI: In a negative surprise, the US GDP in the April-June quarter contracted 0.9% against analysts’ estimate of a 0.5% expansion.
The negative growth comes close on the heels of a 1.6% contraction in the January-March quarter, which means the US is in technical recession.
The Bureau of Economic Analysis, the agency which provides official US macroeconomic and industry statistics, attributed the drop in real GDP to a decrease in private investment as well as government spending.
The provisional GDP numbers, though, showed a rise in exports and personal consumption expenditures. Imports also increased.
The negative GDP growth number came a day after Federal Reserve Chairman Jerome Powell pointed to the robust labour market as evidence that the US economy is not in recession and said that at some point of time they will slow down the rate of interest hike.
Economists blame the US Federal Reserve’s tighter monetary policy for the contraction.
The Federal Reserve had on Wednesday increased the US policy rates by 75 basis points. Following the latest release of data, the US markets fell up to 1% on early Thursday trade, though they later recovered the losses and traded in a flat range.
The US GDP data, which indicates that the world’s largest economy now is technically in the recession zone is expected to weigh on investors’ sentiments worldwide.
Making sense of the jargon
The output of an economy usually rises over time. But, the growth fluctuates. Recession occurs when there is a period of reduced output and a significant increase in unemployment.
Because such bad phases often last six months or more, two consecutive quarters of fall in GDP growth is considered a technical recession