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US economy contracts again sparking recession fears

Inflation in the US hit 9.1pc in June, the fastest pace of price appreciation in more than four decades

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US economy contracts again sparking recession fears
GNN Media: Representational Photo

The US economy has shrunk for the second quarter in a row, a milestone that in many countries would be considered an economic recession.

That is not the case in the US, which uses additional data to make that call.
But the contraction, at an annual rate of 0.9% in the three months to July, has drawn widespread attention as worries about the economy grow.

Prices for groceries, petrol and other basics are rising at the fastest pace since 1981.
As the US central bank raises borrowing costs quickly to try to cool the economy and ease price pressures, fears are rising that a recession is coming - if it has not officially started already.

Faced with sinking public confidence, US President Joe Biden has tried to make the case that the economy remains sound, noting that the unemployment rate remains at a low 3.6% and hiring has remained strong.

This week, ahead of the data from the Commerce Department, he told reporters that the economy was "not going to be in a recession". That prompted his opponents in the Republican party to accuse the White House of trying to redefine the term.

"White House recession 'rebrand' won't reduce Americans' suffering," they said.

In the first three months of the year, the US economy shrank at an annual rate of 1.6%. At the time, economists attributed the decline in gross domestic product (GDP) to quirks in trade data.
But Thursday's report showed more marked slowdown, with growth weighed down by declines in the housing market, business investment and government spending. Consumer spending grew at a slower annual rate of 1%, as people spent more on healthcare, accommodation and dining out, but cut back on goods and groceries.

"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," Mr Biden said on Thursday.

"But even as we face historic global challenges, we are on the right path and we will come through this transition stronger and more secure."

Harvard professor Jeffrey Frankel previously served on the National Bureau of Economic Research committee, the group of academics that is charged with making the official declaration of recession. He said he did not think a recession started at the beginning of the year, noting the strong jobs growth. But after that he was less confident.

"Things have already slowed down, so I'm not saying that everything is great," he said. "Odds of a recession going forward are substantially higher than for a random year."

Inflation in the US hit 9.1% in June, the fastest pace of price appreciation in more than four decades.

On Wednesday, the US central bank responded to the problem with another unusually large increase to its key interest rate, its second 0.75 percentage point rise since it started raising rates in March.

By making borrowing costs more expensive, the Federal Reserve is hoping to reduce spending on items such as homes and cars, in theory easing some of the pressures putting up prices. But lower demand also means a decline in economic activity.

Recent reports have shown consumer confidence falling, the housing market slowing, and the first contraction in business activity since 2020. The US stock market has sunk since the start of the year, and companies from social media giant Meta, the owner of Facebook and Instagram, to carmaker General Motors have said they plan to slow hiring. Some other firms, especially in the property sector, have announced job cuts.

Federal Reserve chairman Jerome Powell said this week that he did not think the US economy was in recession, but he noted that some slowdown had begun and more was likely to be necessary for inflation to return to more normal levels.

Just how severe the expected downturn will be remains a matter of heated debate.

"The last time we saw inflation this high, in the 1980s, we had a pretty deep recession," said Laura Veldkamp, finance professor at the Columbia Business School. She said policymakers have learned from that experience, raising hopes for a milder downturn.

But slowdowns in China and in Europe, which has been hit harder by the surge in energy prices from the war in Ukraine, raise risks from abroad. Nor is the US alone in raising interest rates.
"Many other countries have more serious problems... and they will very likely get hit and that could spill over to us," Prof Frankel said.

He said it was important to consider factors such as the labour market to determine the start of a recession, noting that some downturns, like the burst of the dot com bubble in 2001, would not qualify as a recession under the two-quarters-in-a-row-of-contraction rule, despite the many jobs lost.

Estimates of output in the large US economy often get updated significantly as more data comes in. Even in the UK, there are cases of recessions getting revised away.

Politics, he added, has nothing to do with it, at least historically.

"Every knowledgeable macroeconomist knows that recession in the US is not defined by a mechanical rule," Prof Frankel said. "But given the polarisation of politics, there are people who are going to be cynical about it and assume the worst."

SOURCE: BBC NEWS

Sports

2nd ODI: Pakistan to face Netherlands today

Pakistan is leading the series by 1-0.

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2nd ODI: Pakistan to face Netherlands today

Rotterdam: The second One-Day International of the three match series between Pakistan and Netherlands will be played on Thursday (today) at Rotterdam.

The match will start at 02:00 pm.

Pakistan is leading the series by 1-0.

Pakistan squad

Babar Azam (c), Shadab Khan, Abdullah Shafique, Fakhar Zaman, Haris Rauf, Imam-ul-Haq, Khushdil Shah, Mohammad Haris, Mohammad Nawaz, Mohammad Rizwan, Mohammad Wasim Jnr, Naseem Shah, Salman Ali Agha, Shaheen Afridi, Shahnawaz Dahani, Zahid Mehmood

Netherlands squad

Scott Edwards (c), Musa Ahmad, Shariz Ahmad, Wesley Barresi, Logan van Beek, Tom Cooper, Aryan Dutt, Arnav Jain, Viv Kingma, Ryan Klein, Bas de Leede, Teja Nidamanuru, Tim Pringle, Max O'Dowd, Vikram Singh

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Pakistan

President urges youth to participate in monsoon plantation drive to cope with climate change

"Pakistan was the eighth country most vulnerable to the negative effects of climate change"

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President urges youth to participate in monsoon plantation drive to cope with climate change

Islamabad: President Dr Arif Alvi on Thursday called for concerted efforts by all segments of society to carry out extensive plantations in a bid to save the country from the horrendous effects of climate change.

In his message on the launch of the national monsoon tree plantation drive, he urged every citizen, particularly youth, to actively participate in the campaign by planting trees in residential areas, on roadsides, and near industrial zones.

President Alvi said Pakistan was the eighth country most vulnerable to the negative effects of climate change.

He mentioned that rising mercury levels were resulting in glacier melting and urban flooding.

During the last 19 years, he said, Pakistan suffered around 173 incidents related to climate change besides the massive destruction this year as well.

The president said as per international standards, a country required 25 percent forest cover, however, pointed out that Pakistan only had 4.8 percent of the green area according to a World Bank report.

He emphasized carrying out plantation at a large scale across the country and mentioned the Ten Billion Tree Tsunami as the largest such plantation project in the country’s history.

Under the project, he said, 1.81 billion trees had been planted by June 2022. By 2023, around 3.29 billion trees will be planted.

President Alvi said 10,000 saplings were planted in the premises of the Aiwan-e-Sadr in 2021, while a Miyawaki forest was also raised at an area of 1.5 acres under the Green Presidency Initiative.

He expressed confidence that an increase in forest cover would help mitigate the effects of climate change in the country and would also control urban flooding.

Also, the extensive plantation would result in the preservation of wildlife and flora and fauna in the country, he added.

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Pakistan

By-election on NA seats: PTI announces nationwide election campaign

The party's chairman, Imran Khan, will address rallies in 17 cities of the country

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By-election on NA seats: PTI announces nationwide election campaign

Islamabad: The PTI on Thursday announced nationwide rallies in connection with upcoming by-elections on nine National Assembly seats.

The party's chairman, Imran Khan, will address rallies in 17 cities of the country.

According to the party's schedule, Khan will demonstrate his political sghow in Rawalpindi on Sunday, August 21, Haripur on Wednesday, August 24, Karachi on Friday, August 26, Sukkur on Saturday, August 27, and Imran Khan on Sunday, August 28 in Peshawar.

Apart from this, Khan will address a meeting in Jhelum on Monday, August 29, Attock on Wednesday, August 31, Sargodha on Thursday, September 1, Gujarat on Friday, September 2, and Bhawalpur on Saturday, September 3.

According to the schedule, the former prime minister will address public meetings in Bahawalnagar on September 7, Multan on September 8, Sheikhupura on September 9, Gujranwala on September 10 and Quetta on September 11.

According to PTI leader Ali Zaidi, the August 19 rally in Karachi has been postponed due to heavy rains.

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