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A CNBC analyst’s reaction to the surprise news that the country’s gross domestic product shrank by 0.9% went viral on Thursday as the dismal figures confirmed that the US is now in a recession, according to the definition commonly used by economists.
“Oh, my gosh,” CNBC analyst Rick Santelli said, scrambling to collect his thoughts in the moments after the surprisingly weak GDP data was released early Thursday.
“Not only was I wrong, down nine-tenths of 1% on first look at second-quarter GDP — down nine-tenths of 1%.”
“OK, I know there’s an organization that decides whether we’re in a recession or not, but investors are not going to wait,” he said.
“Two back-to-back negative quarters, it’s not good, call it whatever you want.”
The Commerce Department announced on Thursday that the US economy shrank by 0.9% — which surprised analysts who were predicting that it would grow by a modest 0.3%.
Last quarter, the country’s GDP fell by 1.6%.
There appears to be little immediate relief in sight as consumers are weighed down by record levels of inflation and high gas prices.
The Commerce Department on Friday released data showing that an inflation gauge that is closely watched by the Federal Reserve rose 6.8% in June — the largest increase in four decades.
🚨🚨: The economy shrank .9% in the second quarter. Biden's recession is now official upon us. Rick Santelli: "It's not good, whatever you want to call it." pic.twitter.com/y8cjLl9l8D
The GDP report — seen as the broadest indication of the US economy’s performance — was released one day after the Federal Reserve hiked its benchmark interest rate by three-quarters of a percentage point for the second straight month to cool inflation, which hit 9.1% in June.
The Fed’s sharp rate hikes have stoked concerns about its ability to engineer a “soft landing” by taming inflation without causing an economic downturn.
Despite the fact that a drop in GDP for two straight quarters meets the definition of a recession, Treasury Secretary Janet Yellen held firm that the economy was not in a recession.
Yellen said experts “should avoid a semantic battle” when discussing the US economy, even as the White House on Thursday scrambled to push back against the widely held view among economists that two straight quarters of GDP declines are the definition of a recession.
“Most economists and most Americans have a similar definition of recession — substantial job losses and mass layoffs, businesses shutting down, private-sector activity slowing considerably, family budgets under immense strain,” Yellen argued during a press conference on Thursday afternoon.
“In sum, a broad-based weakening of our economy. That is not what we’re seeing right now when you look at the economy,” she added.
“Job creation is continuing; household finances remain strong. Consumers are spending and businesses are growing.”
Additional reporting by Thomas Barrabi