White House Girds for GDP Decline and Possible Recession

Later this month, the US government will release GDP numbers which may or may not indicate the economy is in a recession. The White House is already taking steps to prepare for a potentially negative report.

A recession is typically defined as two-quarters of negative growth. In Q1 2022, according to the Bureau of Economic Analysis, part of the US Department of Commerce, the US economy delivered real gross domestic product (GDP) at a negative annual rate of 1.4 percent.  In the fourth quarter of 2021, real GDP increased by 6.9 percent – thus, the economy was slowing rapidly. Some observers believe Q2 2022 will bring another negative number – others believe it will be slightly positive. The Biden Administration is not taking any chances, though by attempting to redefine a recession – even if there is a negative number.

To quote the White House:

“What is a recession? While some maintain that two consecutive quarters of falling real GDP constitute a recession, that is neither the official definition nor the way economists evaluate the state of the business cycle. Instead, both official determinations of recessions and economists’ assessment of economic activity are based on a holistic look at the data—including the labor market, consumer and business spending, industrial production, and incomes. Based on these data, it is unlikely that the decline in GDP in the first quarter of this year—even if followed by another GDP decline in the second quarter—indicates a recession.”

While the US may dodge a recession, for now, a growing number of observers anticipate a recession at some point in the coming months as inflation remains stubbornly high and the Federal Reserve is determined to bring it down to around its 2% target – meaning more interest rate hikes and a slowing economy. While the Administration sought to deflect inflationary concerns for many months by claiming it was transitory, the reality proved to be otherwise. Then, of course, there is the risk of stagflation. None of this is any good for near-term economic activity.

 

 

 



Sponsored Links by DQ Promote

 

 

Send this to a friend