Although the central bank had formerly expected economic output to grow by 0.4% during the third quarter, lower manufacturing and construction output compelled policymakers to downgrade forecasts to a 0.1% contraction — marking the “second successive quarterly decline,” according to minutes from a Wednesday meeting. Officials nevertheless hiked interest rate targets in order to quell high inflation.
British media outlets interpreted the Bank of England’s commentary using the rule-of-thumb definition of a recession — two consecutive quarters of negative growth.
“Britain’s economy is now in recession, the Bank of England has said, as it raised interest rates to tackle the worst bout of inflation for 40 years,” The Guardian reported.
“Experts at the Bank of England (BoE) have said that the UK economy is already in recession after gross domestic product (GDP) shrank for the second straight quarter,” Yahoo Finance UK added.
“The Bank now expects the UK economy to shrink between July and September,” the BBC commented. “This comes after the economy already shrank slightly between April and June and will push the UK into recession, defined as when an economy shrinks for two consecutive quarters.”
In the United States, data from the Bureau of Economic Analysis likewise indicated that the economy met the definition of a recession, since output shrank at a 1.6% annualized rate in the first quarter and a 0.6% pace in the second quarter. More recent data from the Federal Reserve Bank of Atlanta showed that the economy will likely stagnate in the third quarter as well.
Several leading American media outlets, however, refused to acknowledge that the country entered a contractionary period based on the traditional definition of a recession.
“Two consecutive quarters of negative GDP growth are thought to be sufficient for a recession call, but the NBER makes a subjective interpretation using a variety of data,” Forbes reported in August.
“Yes, the economy is cooling off after last year’s gangbusters growth,” CNN Business said, “but no, it does not appear to be suffering the kind of downfall that would qualify as a recession.”
“The most recent evidence suggests the U.S. is not on the verge of its second recession in three years, but rather the economy is growing at a steady if somewhat slower pace,” MarketWatch explained.
“The American economy is losing steam and is vulnerable to sinking into a recession but it’s not in one yet,” CNN Business reported based on an interview with Moody’s Analytics Chief Economist Mark Zandi.
The talking points followed remarks from members of the Biden administration, who, citing the lack of an official verdict from the National Bureau of Economic Research, likewise argued that the nation has not yet definitively entered a prolonged contraction.
“While some maintain that two consecutive quarters of falling real GDP constitute a recession, that is neither the official definition nor the way economists evaluate the state of the business cycle,” the White House said in a blog post. “Instead, both official determinations of recessions and economists’ assessment of economic activity are based on a holistic look at the data — including the labor market, consumer and business spending, industrial production, and incomes. Based on these data, it is unlikely that the decline in GDP in the first quarter of this year — even if followed by another GDP decline in the second quarter — indicates a recession.”
Further arguing that “you don’t see any of the signs” of a broader contraction, Treasury Secretary Janet Yellen referred to “solid” consumer spending figures and robust employment rates during an interview with NBC host Chuck Todd. “We’re in a period of transition in which growth is slowing and that’s necessary and appropriate and we need to be growing at a steady and sustainable pace,” she contended. “So there is a slowdown and businesses can see that and that’s appropriate, given that people now have jobs and we have a strong labor market.”