US clings on brink of recession as GDP contracts in Q2, 2022

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US clings on brink of recession as GDP contracts in Q2, 2022

In what has been widely viewed as a potentially alarming sign for economic activities in the United States, the US economy has unprecedentedly contracted over the second quarter of 2022 which appears to have bolted out of the blues, as consumer spending grew by the slowest pace in more than 24 months in the wake of a malicious mirage from US Federal Reserve to gamble on an aggressive rate-hike cycle to tame inflation indicators.

In the matter of the fact, latest Government data revealing a contraction in US economic activities on Q2, 2022, came forth just a day after the US Fed had raised its benchmark borrowing cost between a range of 2.25 to 2.50 per cent, wreaking havocs on business activities and spurring up the US Dollar while prompting common Americans to empty up their savings.

Regardless of the US Fed’s policy to promote Dollarization or to tame a teetering inflation-surge, the fastest rate-hike from the US Central Bank over four decades had actively contributed to the back-to-back contractions in US GDP over two straight quarters this year, suggested analysts.

Nevertheless, before initiating its ultra-hawkish rate-hike cycle earlier in the year, the US Fed had warned that the US economy would highly likely to slow down over the second half of the year, while heavyweight US lenders like of JPMorgan had heightened up the risk of a recession in the US by early-2023.

US economy contracts in second quarter

According to Government data released earlier on Thursday, US GDP had shrunk by 0.9 per cent in Q2, 2022, while consumer spending slowed down by a significant scale amid a skyrocketing inflation-surge.

Business investment contracts as well, which has been well in alignment of a sharp depreciation in US business borrowing for investment, a critical indicator to future business investments. Nevertheless, followed by the release of US Commerce Department data, a number of analysts were quoted saying that the unprecedented scale of contraction in US GDP over Q2, 2022, coupled with a lacerating inflation-surge, had been almost entirely catalysed by an unremitting weakening of economic profile, while exports seemed to be a fainting shimmering ray of hope by the end of tunnel.