Economic growth in the US increased this spring, raising hopes of controlling inflation without a severe slowdown. The economy grew by 2.8% from April to June, thanks to strong consumer spending, according to the Commerce Department.
This growth was faster than expected but still slower than last year. This comes during a heated presidential campaign, with many voters worried about the economy.
Typically, strong growth helps the party in power, which would be the Democrats. However, the situation is mixed. Unemployment is low at 4.1% but rising.
Growth is good but slower than the post-Covid boom. Inflation has decreased but remains a concern with prices up 20% since 2021, and borrowing costs are high. President Biden’s decision to not run again complicates things further.
Mark Zandi, chief economist at Moody’s Analytics, noted that voters have mixed feelings about the economy. Forecasts had predicted 2% growth, but the economy rebounded from a slow start to the year. The report also showed more business investment and higher exports.
President Biden said the report shows the US has the strongest economy in the world. However, Michael Lewis-Beck from the University of Iowa said growth hasn’t been strong enough to offset Biden’s unpopularity.
He predicted a narrow loss for Biden based on early-year growth, and Biden stepping down removes the advantage of being the incumbent.
Some analysts believe Biden’s decision could help Democrats highlight his successes and distance themselves from issues like inflation. Danielle Deiseroth from Data for Progress said Kamala Harris could benefit by separating herself from Biden on inflation while promoting popular economic policies.
Zandi said he felt better about predicting a Democratic victory now that Biden is not running, though the election will be close.
What happens to the economy in the coming months is crucial. Analysts don’t expect major changes before November but anticipate some weakening.
The Federal Reserve might cut interest rates in September to prevent a recession, but the strong GDP report might make them hesitant.
The Fed’s actions are crucial, especially since a rate cut could help households and businesses and potentially boost Democrats, Zandi said.
This summary is based on information from BBC News.
https://www.bbc.com/news/articles/cp6841e1weeo