Good news for Americans, but especially for the
Joe Biden
's re-election campaign
fighting this year
to defeat Donald Trump
: the US economy grew 3.1 percent in 2023 –
more than expected
– and moved away from recession fears by showing an optimistic outlook for consumers and businesses in a crucial election year.
Biden's hope, which everything indicates
will repeat his duel with the Republican magnate on November 5
, is that these numbers break the
strange paradox
that exists in the country: the post-pandemic United States economy
is doing well
, much better than in the rest of the global powers, but the Americans
still do not perceive it that way
and blame the president for a poor performance in that key area.
As released by the Bureau of Economic Analysis this Thursday, US GDP grew in the last three months of the year
faster than many experts had anticipated
, at an annual rate of 3.3 percent, to close the year at 3.1 total.
This is a sign that the government, together with the Federal Reserve's rate policy,
managed to reduce inflation and ensure a “soft landing”
without major repercussions for the economy or for workers, since unemployment still remains at levels low, 3.7%.
The Biden administration, together with the FED's rate policy, managed to reduce inflation and ensure a “soft landing.”
Photo: SAUL LOEB / AFP
Inflation
fell rapidly from a peak of 9.1% annualized
in June 2022 to 3.4% annualized last month and there are signs that it is continuing to fall: prices have risen at an annual rate of 1.7% in the last three months of 2023, even
below the
Fed's long-term goal of 2 percent.
“It's hard to imagine how things could look better for the soft landing,” Brian Rose, senior economist at UBS, told The New York Times. “Looking back at last year, the combination of growth and inflation that we had was not considered in "The scope of what is possible for most people. To have
such strong growth, such low unemployment and inflation to fall so quickly
, even the optimists were not so optimistic," he added.
Consumer spending, key
Consumer spending
was key to the recovery of the economy
.
The labor market remained solid and this data, together with the increase in salaries, made it possible for many citizens to continue spending their dollars especially on services such as entertainment, travel and meals, even at a time of high inflation.
Consumption accounted for most of the economy's growth in the fourth quarter.
Increased public spending, at the state, local and federal levels, as well as increased exports and increased private and residential investments, also underpinned year-end growth, the official report shows.
Consumer spending was key to the recovery of the economy.
Photo: Yuki IWAMURA / AFP
The information reaches Biden at a key moment.
The growth numbers are a political boost for the president, as every year of his term the country has seen GDP growth, despite some difficult quarters.
Last year's 3.3% expansion exceeds GDP growth in every year of President Donald Trump's term, including 2019, when the economy grew 2.95%.
The United States
is growing more than Europe and Great Britain,
which are on the brink of recession, while China, the second largest economy in the world, is still slowly recovering at 5.2% with an uncertain outlook.
Overall, economic growth in advanced economies is expected to slow this year to 1.4% according to the International Monetary Fund.
Biden's policies helped the economy recover last year, primarily by funding infrastructure and clean energy projects that
created new jobs
and spurred
$640 billion in private investment.
Biden's problems
However, the president is having trouble convincing voters that the economy is improving because Americans still
don't seem to have a sense of progress in their pockets
.
In fact, 58% of citizens disapprove of Biden's handling of the economy, against 37% who support it, according to an average of RealClearPolitics surveys.
Regarding the management of inflation, 64.6% are against it, while only 32.3% approve it.
Rising prices, especially on essential goods like food, housing and utilities, cloud Americans' views on the economy, and inflation routinely tops the list of voters' biggest concerns.
Biden's policies led to the creation of new jobs.
Photo: Bloomberg
The key to this paradox has been the increase in interest rates by the Federal Reserve.
The Fed has
aggressively
raised them since last year in an attempt to slow the economy enough to reduce inflation.
Although their efforts are working (prices are up 3.4 percent from a year ago, down from a peak of 9.1 percent in June 2022),
many Americans feel prices are high
(in They are actually higher than before the pandemic) although salaries have been consistent.
But, although the Fed
stopped raising rates
in the latest reviews , it has not yet proceeded to lower them.
In a country where
everything is bought in installments
(homes, cars, furniture, etc.), citizens
are trapped in loans that are difficult to pay.
The Fed has given signals that this year it would begin to lower the rate and this would contribute to improving the prospects of citizens, experts say.
Still, there are signs that Americans are starting to feel better about the economy as inflation eases.
The level of consumer confidence
rebounded in November and December
.
However, it is unclear whether that will translate into votes for Biden.
The president seeks
to take advantage of the moment
and as soon as the numbers came out, the White House issued a statement signed by the president-candidate: “Today we learned that the US economy grew 3.1% last year, and It also added another 2.7 million jobs, and core inflation fell back toward the pre-pandemic benchmark.
As a result, wages, wealth and employment are higher now than before the pandemic.
That's good news for American families and workers.
There are three consecutive years of growth of the economy from the center outwards and from the bottom up during my mandate.
But our work is not done.”
And, in a direct campaign message to his rival Donald Trump, he added: “I will not allow
extremist Republicans
to hand out massive gifts to the rich and large corporations, while increasing costs and cutting health and social spending.”