The US Commerce Department has updated its data on the second quarter GDP decline, correcting it to show a lesser economic contraction that previously reported.
Originally, data suggested that the US economy shrank 0.9% compared to the second quarter of 2021, but the latest data based on improved information about consumers' activity suggests that it actually contracted 0.6%.
However, even with the updated data, the US economy still falls into the technical definition of a recession, according to numerous evaluation systems which consider two straight quarters of negative GDP growth to represent a recession. After registering GDP reductions in the first and second quarters, the net drop in US GDP this year stands at 1.6% compared to the first half of 2021, making 2022 the worst period for the US economy since the start of the pandemic.
However, the notion that the US economy is in recession is fiercely challenged by the Biden administration and Federal Reserve Chairman Jerome Powell. Both cite low levels of unemployment and high spending – features uncharacteristic for economies suffering a recession.
"I do not think the US is currently in a recession, and the reason is there are too many areas of the economy that are performing too well. This is a very strong labor market. […] It doesn’t make sense that the economy would be in a recession with this kind of thing happening," Powell.
News of the recession hit the administration as Democrats brace for potentially tough November 2022 midterms. Party strategists fear that President Joe Biden's low ratings, a failure to push his legislative agenda, the Build Back Better Plan in full, and a number of economic woes would tank the Democrats' results.
Americans have been experiencing the pressure of decades-high inflation of late, complaining about rising grocery and fuel costs, amongst others. Biden blames the Russian special military operation in Ukraine for the price hike, even though the inflation started breaking records in November 2021.
Average US fuel prices set historic highs this summer following the US’ decision to do away with Russian oil, prompting domestic gasoline supply to drop and global crude prices to surge. The fuel price fell back slightly after Washington decided to drop the federal gasoline tax, urging the states do the same on their local level.
For their part, Republicans blame the historic surge in inflation on Democrat policies and exorbitant spending, including on COVID relief last spring. This spending also prompted opposition within the Democratic Party itself, with Senator Joe Manchin refusing to let Biden's Build Back Better bill pass the even-split upper chamber until its budget had been slashed radically.