On September 29th local time, the final revised data released by the U.S. Department of Commerce showed that the U.S. GDP (GDP) fell by 0.6% on an annualized basis in the second quarter of 2022, which is the same as the previously announced revised data. This also means that the US economy has declined for two consecutive quarters and has fallen into a technical recession. Analysts believe that as the Federal Reserve continues to aggressively raise interest rates on various economic activities, the economic outlook for the United States in the second half of this year is not optimistic.
△CNN reported that the latest GDP data confirmed that the US economy has contracted for two consecutive quarters, supporting one of the definitions of the recession.
Economic shrinkage for two consecutive quarters
The US Department of Commerce will make three estimates of quarterly GDP data based on the continuously improved economic information. According to its latest third revised data released, U.S. GDP fell by 0.6% on an annualized basis in the second quarter of this year, in line with market expectations and the same as the previous second revised data, better than the first released decline of 0.9%.
The U.S. Department of Commerce said that the real GDP of the U.S. contracted in the second quarter, reflecting a decrease in private inventory investment, residential fixed investment, federal spending, and state and local government spending.
Specifically, the reduction in private inventory investment is caused by the decline in retail industry, the reduction in fixed residential investment is caused by factors such as the reduction in commissions of real estate agents, the reduction in federal government spending reflects the reduction in non-defense spending, and the reduction in state and local government spending is caused by the reduction in structured investment.
analysis believes that since the US economy has shrunk by 1.6% on an annualized basis in the first quarter of this year, the final correction data in the second quarter means that the outside world has confirmed that the US economy has declined for two consecutive quarters, which is in line with the definition of a technical recession.
Rüdiger Bachmann, a professor of economics at the University of Notre Dame, analyzed to CCTV reporters: "One of the main reasons for negative economic growth is actually the decline in residential investment. Considering the high interest rates in the United States, this is not surprising, and this is exactly what we are seeing. As a reaction to the rise in federal funds interest rates, residential investment in the United States is declining with the rise in mortgage interest rates. This is what can be predicted according to economic textbooks."
△ "Wall Street Journal " reported that the U.S. housing mortgage interest rate rose to 6.7%, the highest level since 2007.
The Federal Reserve cooled down the economy
Another final revised data released by the U.S. Department of Commerce on the same day showed that the U.S. personal consumption expenditure (PCE) price index rose 7.3% month-on-month in the second quarter of this year, especially the core PCE price index , which excludes food and energy, rose 4.7% month-on-month, higher than expected 4.4%, again indicating that the US price level remains high.
analysis believes that due to the delay in effectively controlling inflation, the Federal Reserve will continue to tighten its monetary policy. The current market expects the Federal Reserve to control inflation at the expense of economic growth and may raise interest rates by 75 basis points again at the monetary policy meeting in November. The outside world is worried that the continued aggressive interest rate hikes may worsen the outlook for the US economy.
Rudiger Bachmann, a professor of economics at the University of Notre Dame, told CCTV reporters: "As for the rest of the year, I think we will definitely see weak economic growth, but this is part of the intention of the Federal Reserve. The Federal Reserve hopes to cool down the economy and needs to fight inflation through economic slowdowns. In the United States, what we most want to see now is a soft landing, that is, a growing GDP despite its sluggish but still growing and a sustained low unemployment rate."
At present, it seems that the prospect of whether the US economy can achieve a soft landing is worrying. Many analysts are worried that the risk of a hard landing in the economy is rising due to the continued aggressive rate hikes in the Federal Reserve, and the pain caused by austerity policies is beginning to emerge at all levels of the economy.
Goldman Sachs Group Analysts previously expected that as interest rates continue to rise, U.S. stock markets may experience more declines, and if the U.S. economy falls into recession, the stock market may fall further by about 10%.At the same time, the latest data shows that the growth rate of house prices in the United States in July has slowed down under multiple pressures, and has seen its first month-on-month decline since January 2019, which has caused concerns from the outside world about the overall real estate market.
Federal Housing Loan Mortgage Company (Freddie Mac ) recently released a survey of lending institutions. The average interest rate for 30-year fixed-rate mortgages in the United States has climbed to 6.7%, the highest level since July 2007. Just a year ago, the interest rate was only 3.01%. Analysts believe that the real estate market may face pressure as higher mortgage rates weaken buyer demand, which may have an impact on overall consumer confidence. (CCTV reporter Gu Xiang Xu Dezhi)
Editor: Shu Mengqing
Source: CCTV News Client
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