The U.S. Commerce Department announced Thursday that Gross Domestic Product (GDP) declined 0.9% in the second quarter, contrary to analysts’ expectations. This would conform to a recession scenario, as it is the second consecutive quarterly decline. In the first quarter of the year, a drop of 1.6% was recorded.
The markets’ first reactions to the announcement have been downward. While bitcoin showed a 0.75% decrease in the last 24 hours, the S&P 500 and Nasdaq indices exhibited a 0.9% and 1.05% decline, respectively, following the announcement. However, a subsequent bitcoin rally has taken its price back above USD 23,000.
The announcement of the Commerce Department figures comes a day after the Federal Reserve’s announcement to raise interest rates for the second time by 0.75%, which restricts access to loans and is aimed at curbing inflation. However, as consumption slows, the possibility of a recession increases.
Spokesmen deny a recession.
On the other hand, the Fed does not believe we are in a recession. This Wednesday, when the contraction in the second quarter of the year had not yet been confirmed, Jerome Powell told a press conference that he did not believe we were in a recession, as there were indicators that unemployment was declining in the United States. He referred to 750,000 new jobs in the first half of the year.
The effect of the past March (0.5%) and June (0.75%) rate increases has not been reflected in a decrease in inflation. The June inflation figure of 9.1% was the highest in four decades, and in some essential items, the price increase was more elevated. Food registered a 10.4% increase, while energy reported a 41.6% increase in June.