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US enters recession - or does it?

The US's real gross domestic product (GDP) decreased for the second consecutive quarter, according to the Bureau of Economic Analysis, but don't call it a recession.

GDP decreased at an annual rate of 0.9% in Q2, this follows the 1.6% retracement in Q1.

"The decrease in real GDP reflected decreases in private inventory investment, residential fixed investment, federal government spending, state and local government spending, and non-residential fixed investment," the Bureau of Economic Analysis said.

Meanwhile, real disposable personal income decreased 0.5% in the second quarter, compared with a decrease of 7.8% in the first quarter.

While it's universally accepted that two back-to-back quarters of negative growth are considered a recession, this isn't a technical definition. Instead, the National Bureau of Economic Research (NBER) committee has the power to determine when the US economy officially enters a recession.

The NBER defines a recession as "a significant decline in economic activity that is spread across the economy and lasts more than a few months."

Also, while this committee rules when a recession starts, it traditionally waits months after a recession has begun before announcing one.

Responding to the second quarter GDP report, US president Joe Biden said: "Coming off of last year's historic economic growth - and regaining all the private sector jobs lost during the pandemic crisis - it's no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation."

Biden went on to tout the nation's 3.6% unemployment rate, second quarter job creation and strong levels of consumer spending.

Later at a press conference, he cited the data and said: "That doesn't sound like a recession to me."

A few days ago, as previously reported by Financial Standard, Biden also said:  "While some maintain that two consecutive quarters of falling real GDP constitute a recession, that is neither the official definition nor the way economists evaluate the state of the business cycle."

"Recession probabilities are never zero, but trends in the data through the first half of this year used to determine a recession are not indicating a downturn."

Read more: RecessionGDPBureau of Economic AnalysisNBERFederal ReserveFinancial StandardJoe BidenNational Bureau of Economic Research