China News Service, July 29 (Xinhua) According to a comprehensive report, the latest data shows that the US economy has shrunk for two consecutive quarters, but US President Biden does not believe that the country's economy has entered a recession. The current situation doesn't look like a recession, he said.

However, multiple factors, such as high inflation in the United States, the uncertainty of the Fed raising interest rates, and the impact of economic contraction on the mid-term elections, have put the US economy into a predicament with an uncertain future.

U.S. GDP shrinks for two consecutive quarters

Strong recession signal

The COVID-19 pandemic disrupted supply chains. The conflict between Russia and Ukraine pushed up the prices of commodities such as crude oil and wheat, pushing U.S. inflation to a 40-year high. Consumer confidence was low and purchasing power was reduced.

According to Reuters, the U.S. Department of Commerce released its first estimate on the 28th that in the second quarter of 2022, the U.S. gross domestic product (GDP) fell by 0.9% at an annual rate, marking the second consecutive quarter of contraction in the U.S. economy.

CNBC pointed to a number of factors contributing to the decline, including declining inventory, residential and nonresidential investment, and government spending at the federal, state and local levels.

According to a CNN analysis, in recent quarters, U.S. companies have tried to replenish inventories reduced during the new crown pandemic to adapt to volatile supply chains. However, the purchasing power of consumers has been weakened by inflation, which has left companies with a build-up of inventories.

In addition, the U.S. Federal Reserve (FED) aggressively raised interest rates to suppress inflation, leading to a surge in mortgage interest rates and a significant cooling of residential investment.

"Overall, the economy is slowing, and that's what (the Fed) wants," said Ryan Sweet, head of real-time economics at Moody's Analytics.

Biden: Economic slowdown 'not surprising'

Many economists expressed concern

However, the U.S. government insists that two consecutive quarters of economic contraction did not constitute a recession. The White House issued a statement on the 21st saying that in addition to GDP, data related to the labor market, business and personal spending, production and income are all included in the official judgment of the recession.

Biden and senior White House officials tried to assuage concerns with positive data, including employers still hiring, unemployment at a 50-year low and manufacturers continuing to invest.

"This doesn't look like a recession," Biden said in a speech to the media on the 28th.

Earlier in the day, Biden said in a statement that the slowdown was "not surprising" as the Fed was taking action to lower inflation. "We're moving in the right direction, and after this transition period, we'll be stronger and safer," he stressed.

However, according to the Reuters/Ipsos poll, Biden's approval rating has fallen to a record low of 36%. Food, gas and housing costs have risen, and the economy has been listed as a top concern for American voters.

In the face of the approaching mid-term elections in the United States, concerns about the economy may not be conducive to the Democratic Party, which has only a slight advantage, to continue to control Congress.

In fact, concerns about the current state of the U.S. economy clearly outweighed optimism.

The Associated Press reported that "sequential quarters of declining GDP constitute an informal, but not definitive, indicator of recession."

In addition, more and more economists believe that the U.S. economy will fall into a mild recession in the second half of the year as the Federal Reserve actively tightens monetary policy, corporate investment is reduced and talent recruitment is delayed, and the public sees rising prices and gradually tightens their wallets.