Recession fears deepen as US economy contracts again

Gross domestic product declined at an annual rate of 0.9 percent in the second quarter, following a bigger drop in the first three months of the year, according to the Commerce Department.

While not the official definition, two quarters of negative growth is commonly viewed as a strong signal that a recession is underway, and a downturn in the world's largest economy would have global consequences, as well as domestic political costs.

Biden insisted that the US economy is "on the right path," despite the slowdown, but his critics are sure to seize on the report as proof of the veteran Democrat's mismanagement.

The US economy also continues to battle sky-high inflation, as a result of supply chain snarls due to Covid lockdowns, as well as the fallout from Russia's war in Ukraine which has sent food and fuel prices soaring.

The US central bank has been raising interest rates aggressively -- with the latest big hike on Wednesday -- to try to cool the economy and tamp down price pressures.

It would be highly unusual for an economy still adding jobs at a rapid pace and with near record-low unemployment, to fall into recession, but even so many economists say the discussion of a downturn is more a matter of when, not if.

That poses a major political headache for the president, who has seen his approval ratings plummet in recent months as American families struggle to make ends meet due to surging inflation.

Fed Chair Jerome Powell agreed with Biden and other economists who say the GDP figures are inconsistent with other strong data.

Powell on Wednesday said he does not think the country is currently in a recession because "there are too many areas of the economy that are performing too well."

Powell also said it is possible to cool price pressures without causing a downturn or a big jump in joblessness, although he acknowledged the path to thread that needle is narrowing.