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Is the US in recession?
Do not be surprised if, later this month, there is a wave of headlines claiming that the US economy is in recession. But such an assessment would depend on a chain of reasoning that has three important flaws.
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Some observers are expecting the Bureau of Economic Analysis to confirm that the US economy slid into recession in the first half of 2022.
PHOTO: GETTY IMAGES NORTH AMERICA
Jeffrey Frankel
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On July 28, the United States Bureau of Economic Analysis (BEA) will release its advance estimate of second-quarter GDP growth. The impending announcement has observers on the edge of their seats, with many expecting it to confirm that the US economy slid into recession in the first half of 2022. But even if the announcement seems to say that, the reality is more complicated.
The recession prediction is based on two assumptions: first-quarter growth was negative, and a recession is defined as two consecutive quarters of negative growth. As a result, if second-quarter growth is estimated to have been negative, the stock and bond markets could react by rising in the very short run. A recession might lead investors to believe that the US Federal Reserve will ease up on its aggressive interest-rate hikes.
