GDP report signals America in recession

FILE - An American flag adorns the facade of the New York Stock Exchange on June 29, 2022, in New York. Stocks are opening broadly higher on Wall Street Tuesday, July 19, 2022, as more earnings reports roll in from U.S. companies. (AP Photo/Julia Nikhinson, File)

FILE – An American flag adorns the facade of the New York Stock Exchange on June 29, 2022, in New York. (AP Photo/Julia Nikhinson, File)

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UPDATED 6:25 AM PT – Thursday, July 28, 2022

The looming GDP report has been released and shows another contraction in the second quarter. The Bureau of Economic Statistics revealed the national GDP shrank by 0.9 percent. This marks the second straight quarter of decline, further fueling fears of a recession.

The news comes on the heels of the Federal Reserve’s move Wednesday to hike interest rates for the fourth time this year, which is the second consecutive increase of 0.75 percent, in an attempt to combat inflation. In the month of June, Inflation hit 9.1 percent, which is the fastest increase in prices in 40 years.

America’s top central banker, Jerome Powell, is denying assessments that an economic downturn has hit the US. In a statement Wednesday, he said unemployment is low and the labor market is strong. Powell added, “it doesn’t make sense” that the US economy would be in a recession at this point.

“I don’t agree at all, I think it’s really hard to argue we’re not in a recession given the fact that, for instance, just one indicator,” stated Scott Minerd, Chief Investment Officer at Guggenheim Global. “The leading economic indicator that four down prints in a row in on a monthly basis, every time that’s ever happened that is essentially a signal that we are in or we are about to enter a recession.”

However, Powell claimed consumer demand is still strong and the US economy will grow this year, despite data suggesting US households are pulling back on purchases amid runaway inflation. Despite Powell’s stance, economists have pointed out a second negative quarter in a row would mean America is already in a recession.

Economists at Saxo Bank said the US will face higher inflation for an extended period of time because the White House and the Federal Reserve don’t have enough policy choices. In their new analysis, Saxo economists concluded rising federal interest rates will increase US unemployment while rising prices will continue to hurt consumers.

Experts believe energy prices will continue to rise due to political risks. Saxo analysts also said it’s unrealistic to expect inflation to peak in December because that’s when the energy crisis will become worse due to higher. Meanwhile, inflation is unlikely to “peak” anytime soon and it turns out it’s not “transitory” after all, which is contrary to White House claims.

According to the Bureau of Labor Statistics, food prices are up 10.4 percent and the pain at pump has become more severe as gas prices increased by nearly 60 percent over the last year. As prices surge, so are the lines at food banks across the country.

“What we’re hearing from people and families is they’re making these decisions between filling their gas tank to get to work, paying the rent, paying utilities, other basic expenses and meeting their food costs,” explained Michael Flood, CEO of the Los Angeles Regional Food Bank.

Food banks are struggling to meet growing demand as more working Americans grapple with inflation and struggle with feeding their families. Flood said people are looking to pantries and distribution programs just “to try to make ends meet.”

Vanessa Correa, left, and Gigi Fiske, right, pass out gallons of milk at a food distribution held by the Farm Share food bank, Wednesday, July 20, 2022, in Miami. Long lines are back at food banks around the U.S. as working Americans overwhelmed by inflation turn to handouts to help feed their families. (AP Photo/Lynne Sladky)

Vanessa Correa, left, and Gigi Fiske, right, pass out gallons of milk at a food distribution held by the Farm Share food bank, Wednesday, July 20, 2022, in Miami. Long lines are back at food banks around the U.S. as working Americans overwhelmed by inflation turn to handouts to help feed their families. (AP Photo/Lynne Sladky)

Chief Investment Officer Cresset Capital, Jack Ablin explained that the more persistent inflation is, the more aggressive the Federal Reserve has to be. His comments came ahead of the release of the second quarter GDP report. Economists have pointed out a second negative quarter in a row would mean America is already in a recession.

The Biden White House has continued to avoid responsibility for the economic crisis facing the country. During a recent press conference, Economic Adviser Brian Deese suggested Americans shouldn’t complain about inflation as they could be worse off like other countries facing famine. He went on to say that despite inflation hitting a record high in June, the economy is “resilient to the challenges” nation is facing.

“So it’s our view that inflation is the top economic priority that we need to be focused on as a country,” he stated. “And it is our view that if we move out more quickly and more aggressively on the types of steps that the President has outlined, then we are going to move more quickly to helping to bring prices down.”

Deese is not the first White House official to ignore or alter the definition of a recession while trying to downplay the severity of the pain Americans are feeling in their pocketbooks. White House Press Secretary Karine Jean-Pierre also appeared to sidestep recession fears.

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