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| Photo Credit: AP. |
The U.S. economy contracted 0.9% last quarter for the period spanning from April through June, according to the Commerce Department.
The shrinking of the economy has renewed fears of possible recession following a long fought battle by the Feds against rising inflation using the instruments of interest rates hikes.
A report by the
Commerce Department Thursday makes the decline a second straight contraction
for the economy in the last two quarters of 2021. According to the report, the
gross domestic product followed a 1.6% annual drop from January through March, The
Associated Press reports.
Is the U.S. heading for recession?
The United
States may be heading for recession if the streak continues as consumer
confidence is badly hampered by rising inflation, the worst in four decades. The
interest rate hikes is coming with a price – high borrowing costs which
increases the cost of doing business in the country.
The
Associated Press reported that Fed Chair Jerome Powell and many economist have
said that while the economy is showing some weakening, they doubt it’s in
recession, citing the nation’s robust labor market. The labor market boasts of
11 million job openings and an uncommonly low 3.6% unemployment rate, and hence
they argue that a recession is still far away.
Is the U.S. in recession?
The economy
achieved a 5.7% growth at the same period last year a marked progress from the pandemic
triggered recession of 2020 with tens of thousands of businesses shut down and
millions of Americans unable to go to work.
The Fed’s
rates hikes would most likely extend to next year which could inevitably further
increase the cost of doing business and trigger a recession.
The National
Bureau of Economic Research defines recession as “a significant decline in
economic activity that is spread across the economy and lasts more than a few
months.”