The US Department of Commerce recently reported that the country’s economy shrank by 0.9% during the second quarter of 2022.
The alarms are going off in the face of a possible recession because it is the second period of this type that the data of the vital branch shrinks.
During the first quarter of 2022 the fall was even greater, of 1.6% year-on-year. Two consecutive drops in the Gross Domestic Product are symptoms, albeit informal, of a possible future recession.
The most worrying thing is that multiple weaknesses were reflected in all sectors of the country’s economy. For example, to give you an idea of some relevant data, consumer spending slowed down. Business investment fell and inventories were reduced.
As if that were not enough, public spending was also reduced. The high taxes were the executioners of the construction sector. This branch saw how its annual rate fell by 1.4%.
The strong inflation faced by both consumers and companies has brought with it an increase in credit prices.
The Federal Reserve to curb inflation
In the middle of this week the Federal Reserve raised its interest rate by three quarters of a point. This is the second time in a row that it has done so in order to curb the strongest inflation in the last 40 years.
In turn, the Reserve intends to contain the excessive rise in prices and at the same time avoid a dangerous recession. On purpose they draw strategies so that the solution is not drastic.
Consumers are very fearful right now and have lost confidence due to inflation. They even show anxiety about the state of the country’s economy. There is marked uncertainty regarding the short- and medium-term future of this sector.