US Business

The US economy contracted for a second straight quarter between April and June, government data showed Thursday, adding fuel to recession fears in a headache for President Joe Biden ahead of midterm elections.

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, touting the strong labor market.

“That doesn’t sound like a recession to me,” he said in remarks at the White House.

But his critics are sure to seize on the report as proof of the veteran Democrat’s mismanagement.

After a 1.6 percent decline in the first three months of the year, the report said the slowdown in the latest quarter was largely due to drops in government spending at all levels, in private investment on goods including autos, and on residential buildings, despite an increase in exports.

But personal consumption expenditures (PCE) continued to increase, though at a slower rate than the prior quarter, the data showed.

The US economy also continues to battle sky-high inflation, as a result of supply chain snarls due to Covid-19 lockdowns, as well as the fallout from Russia’s war in Ukraine which has sent food and fuel prices soaring.

Consumer prices topped nine percent in June, the highest in more than four decades, while the GDP data showed another key inflation measure, the PCE price index, rose a still-high 7.1 percent in the latest three months, the same as in the January-March period.

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’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation,” Biden said in a statement shortly after the GDP report was released. 

“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,” he said.

– Recession debate –

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. 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.”

Treasury Secretary Janet Yellen said Thursday there was a path to lower inflation without triggering an uptick in joblessness, though she acknowledged “numerous risks” to the economic outlook.

Mike Fratantoni, chief economist of the Mortgage Bankers Association, was among those who echoed Powell’s view, saying “the ongoing strength in the job market and other signs of growth make it unlikely that this will be categorized as a recession.”

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.

But economist Mohamed El-Erian said on Twitter that the data point to “deepening stagflation and flashing red recession risk.”

That impression may be the one that sticks in the minds of investors and consumers.

Wall Street was initially not happy with the data, but stocks rebounded and were solidly higher at mid-afternoon.

The first skeleton of a Gorgosaurus dinosaur to go under the hammer sold for $6.1 million at auction in New York Thursday, Sotheby’s said.

The specimen is 10 feet tall (three meters) and 22 feet long, and had been expected to fetch between $5 million and $8 million.

“The result places the Gorgosaurus among the most valuable dinosaurs ever sold at auction, and establishes a new benchmark for a Gorgosaurus skeleton,” Sotheby’s said in a statement.

The Gorgosaurus roamed the earth approximately 77 million years ago. 

A typical adult weighed about two tonnes, slightly smaller than its more famous relative, the Tyrannosaurus rex.

Paleontologists say it was fiercer and faster than the T-Rex, with a stronger bite of around 42,000 newtons compared to 35,000.

The skeleton was discovered in the Judith River Formation near Havre, in the US state of Montana in 2018.

The sale marked the first time that Sotheby’s had auctioned a full dinosaur skeleton since it sold Sue the T-Rex in 1997 for $8.36 million.

“Today’s Gorgosaurus came to auction without a name, providing the buyer the exclusive opportunity to name the dinosaur,” Sotheby’s said.

Sotheby’s did not reveal the buyer.

Unlike other countries, the United States does not restrict the sale or export of fossils, meaning the skeleton could end up overseas.

Russian strikes on military facilities and residential buildings across war-scarred Ukraine Thursday left several dead in attacks President Volodymyr Zelensky described as “missile terrorism”.

The deadliest attacks, which struck the central Kyrovograd region, came as the country was marking its first Day Of Ukraine Statehood that was announced by Zelensky earlier.

Russia’s invasion has morphed into a gruelling war of attrition and frontline artillery battles. Both sides are striking targets behind the frontlines to dent the others ability to fight a protracted conflict.

“Twenty-five people have been transferred to medical facilities and are receiving treatment. Five are dead,” the region’s governor Andriy Raikovich said in a video on his social media.

The Interfax-Ukraine news agency quoted Raikovich as saying that there were 12 servicemen among the wounded.

City officials said the attacks on the region’s administrative centre, Kropyvnytskyi, damaged “aviation equipment,” aircraft and nearby buildings, Interfax-Ukraine reported.

Kropyvnytskyi lies some 300 kilometres (186 miles) south of the capital Kyiv and three people, including one Ukrainian serviceman were killed in Russian strikes on railway and military infrastructure over the weekend.

Russian strikes reported earlier on Thursday meanwhile destroyed one building at a military base north of Kyiv.

Senior Ukrainian military official Oleksiy Gromov said the missiles that hit the town 30 kilometres (19 miles) north of Kyiv were fired from the Crimea peninsula, annexed by Russia in 2014.

– ‘Troubled morning’ –

At least one person was also killed and two more injured in a strike on the central Dnipro region, its governor Valentin Reznichenko said on social media.

“It’s a troubled morning. Again there is missile terror. We will not give up,” Ukraine’s President Volodymyr Zelensky said on social media.

Russia launched its full-scale invasion of Ukraine in February, displacing millions and killing thousands more. 

Moscow’s forces first tried and failed to wrest control of Kyiv and the country’s second-largest city of Kharkiv, and have since turned their attention to capturing the eastern Donbas region.

There, in the town of Toretsk, Russia launched deadly strikes on a five-story residential building.

“Rescue workers today found and removed the remains of two people — a man and a woman. In total two people died and three were rescued,” regional emergency services said.

They added separately that the toll from strikes on a hotel one day earlier in the Donbas town of Bakhmut under Ukrainian control had increased to four.

AFP journalists in the area reported Bakhmut and nearby Siversk had also been experiencing electricity cuts following strikes in the area.

While fighting since February has centred on the eastern Donbas region, Ukraine’s forces are also building momentum in their counter-offensive for the southern Kherson region.

In the neighbouring southern region of Mykolaiv — key for supplying efforts to recapture Kherson — one person was injured and a school building was destroyed following “extensive” shelling, governor Vitaliy Kim said.

A man convicted of murdering his ex-girlfriend is to be executed in the southern US state of Alabama on Thursday despite the objections of the victim’s family.

Joe Nathan James, 49, was sentenced to death in 1996 for the 1994 murder of 26-year-old Faith Hall.

James is scheduled to be executed by lethal injection at 7:00 pm Eastern time (2300 GMT).

He has petitioned the US Supreme Court to stay his execution “pursuant to the wishes of the surviving members of the family of the victim.”

“The victims and their families are paramount in our justice system, and deserve to be heard on the matter of the ultimate punishment of offenders,” James’ lawyer said in an appeal to the Supreme Court.

Hall’s daughters, who were six and three years old when their mother was murdered, have said they want his life to be spared.

“I don’t want it to go forward. We’re not God,” Terryln Hall told CBS 42.

“An eye for an eye has never been a good outlook for life,” added her sister, Toni Hall.

James was convicted of shooting Faith Hall to death after she broke off their short relationship.

If his execution goes ahead, James would be the eighth person executed in the United States this year.

Overcoming Covid and outfoxing the Republicans: Joe Biden’s having an unusually good week — and he won’t let Thursday’s recession talk spoil his mood.

When the 79-year-old tested positive for the coronavirus last week, it seemed nature had decided to pile in on his already daunting list of manmade woes: highest inflation in four decades, lowest polls of his presidency, and a tiny Democratic congressional majority apparently unable to get anything done.

Fast forward to Wednesday and Biden, declared Covid free by his doctor, emerged from the White House residence to cheers from staff in the Rose Garden.

The sun was shining — literally and politically.

“Now I get to go back to the Oval Office,” he said to applause, sounding as if he were opening a birthday present.

There were reasons for the spring in Biden’s step well beyond the beneficial effects of the five-day course of the therapeutic Paxlovid that helped him through Covid.

The Senate, where Democrats and Republicans are split 50-50 and almost never cooperate, chose Wednesday to pass a bill pouring $52 billion into domestic manufacturing of semiconductors — the high-tech widgets at the heart of almost every piece of modern equipment. Republicans were on board.

If approved by the House, the decision to throw federal weight behind private homegrown production will create thousands of high-skilled jobs and, crucially, begin addressing dangerous US overreliance on foreign companies.

For Biden the bill fits neatly into one of his core priorities, restoring the kind of government-backed research and development that he says will decide whether the United States can keep up with China.

Then a few hours later, with Biden still in the Oval Office, came startling news of another potential Senate win.

This time it wasn’t warring Republicans who had been brought around but the ever-unpredictable Senator Joe Manchin — a conservative Democrat from tiny West Virginia whose one vote in a 50-50 Senate gives him veto power over just about everything.

For 18 months, Manchin has played with Biden’s nerves, haggling on every item. When it came to the president’s signature Build Back Better bill, a behemoth of social and climate-related spending, the West Virginian negotiated seemingly forever before finally refusing to go along and leaving Biden defeated.

So it was a surprise Wednesday when Manchin announced he supports a smaller, yet still impressive bill set to allocate $369 billion for clean energy and climate initiatives and $64 billion for state-funded healthcare.

Biden thanked Manchin for his “extraordinary effort.”

– Recession, what recession? –

Not only did Manchin finally come good, but he cannily announced his move only after Republicans had been lured into voting for the semiconductors bill — something some of them say they would never have done if they knew the Democrats were about to spring the second, bigger spending package.

Democrats are suddenly on a roll and Biden, even with approval ratings stuck below 40 percent, feels his constant optimism will be proved right.

As data came out showing the US economy shrinking for a second successive quarter, his staff worked overtime to get the ‘R’ word out of the conversation.

“The way that we see is that we are not currently in a recession or a pre-recession,” Press Secretary Karine Jean-Pierre said.

Biden, for sure, was not apologizing: “We are on the right path,”  he said as the news came out.

President Joe Biden and Chinese counterpart Xi Jinping spoke by phone for well over two hours on Thursday on mounting tensions over Taiwan, a festering trade dispute and their bid to keep the superpower rivalry in check.

The White House said that the call lasted two hours and 17 minutes. A statement was expected later.

While this was Biden’s fifth talk with Xi since becoming president a year and a half ago, it’s getting hard to mask deepening mistrust between the two countries.

Already stuck in a trade war, Beijing and Washington increasingly risk open conflict over Taiwan, with little sign of resolution on either front.

“Tensions over China’s aggressive, coercive behavior in the Indo-Pacific” will be high on the agenda, said White House National Security Council spokesman John Kirby.

The latest flashpoint is a possible trip by Biden ally and speaker of the House of Representatives, Nancy Pelosi, to the island, which Beijing claims is part of China but has its own distinct, democratic government.

Although US officials frequently visit Taiwan, separated by a narrow strip of water from the Chinese mainland, Beijing considers a Pelosi trip as a major provocation. She’s second in line to the US presidency and given her position may travel with military transport.

Washington will “bear the consequences” if the trip, which Pelosi has yet to confirm, goes ahead, China warned Wednesday.

General Mark Milley, chairman of the US joint chiefs of staff, told reporters that if Pelosi asks “for military support, we will do what is necessary to ensure a safe, safe conduct of their business.”

And the dispute around Pelosi is the tip of an iceberg, with US officials fearing that Xi is mulling use of force to impose control over democratic Taiwan.

Once considered unlikely, an invasion, or lesser form of military action, is increasingly seen by China watchers as possible — perhaps even timed to boost Xi’s prestige when he moves later this year into a third term.

Biden’s contradictory comments on whether the United States would defend Taiwan — he said in May that it would, before the White House insisted there was no change in the hands-off “strategic ambiguity” policy — have not helped the tension.

– No face-to-face –

Biden prides himself on a close relationship with Xi going back years but — in large part due to Covid travel restrictions — the two have yet to meet face-to-face since he took office.

According to the White House, Biden’s chief goal is to establish “guardrails” for the two superpowers.

This is meant to ensure that while they sharply disagree on democracy, and are increasingly rivals on the geopolitical stage, they can avoid open conflict.

“He wants to make sure that the lines of communication with President Xi on all the issues, whether they’re issues again that we agree on or issues where we have significant difficulty with — that they can still pick up the phone and talk to one another candidly,” Kirby said.

Where to place the guardrails, however, is challenging amid so many unresolved disputes, including a simmering trade war begun under Donald Trump’s presidency.

Asked whether Biden could lift some of the 25 percent import duties placed on billions of dollars of Chinese products by Trump, Kirby said there was still no decision.

“We do believe… that the tariffs that were put in place by his predecessor were poorly designed. We believe that they’ve increased costs for American families and small businesses, as well as ranchers. And that’s, you know, without actually addressing some of China’s harmful trade practices,” Kirby said.

But “I don’t have any decision to speak to with respect to tariffs by the president. He’s working this out.”