The US economy saw resilient growth in the third quarter despite a modest slowdown according to government data Wednesday, less than a week before inflation-weary voters head into the presidential election.
The world’s biggest economy expanded at an annual rate of 2.8 percent in the July-September period, helped by consumption and government spending, although slowing from the second quarter’s 3.0 percent pace, the Department of Commerce said.
Despite spending more, American consumers have been downbeat about their job and financial prospects, with Democratic Vice President Kamala Harris still trailing Republican Donald Trump in opinion polls about the economy.
But sentiment could improve with consumer confidence this month logging the strongest monthly gain since March 2021, according to The Conference Board on Tuesday.
“Today’s GDP report shows how far we’ve come since I took office — from the worst economic crisis since the Great Depression to the strongest economy in the world,” said President Joe Biden in a statement.
Economist Ryan Sweet of Oxford Economics said the latest figure “sends a clear message that the economy is doing well.”
He noted that inflation is cooling too, adding that “trend growth in GDP remains solid, reducing the risk of a sudden and significant increase in layoffs.”
The US economy was anticipated to expand by an annual 3.0 percent rate in the third quarter, according to a market consensus published by Briefing.com.
US growth this year is due to outpace other advanced economies like Germany, France and the United Kingdom, according to recent International Monetary Fund estimates.
On Wednesday, the Commerce Department said the GDP figure reflected “increases in consumer spending, exports, and federal government spending.”
The deceleration from the second quarter was mainly due to a downturn in private inventory investment, alongside a bigger drop in residential fixed investment.
An October New York Times/Siena College poll of likely voters released last week showed that economic issues remained top-of-mind around two weeks before the election.
Those polled were slightly more inclined to trust Trump to do a better job handling the economy, with 52 percent of respondents preferring him to 45 percent support for Harris.
– Inflation ‘hard to swallow’ –
“If you were to look at numbers like GDP growth or income or consumption, or even employment, you’d say: ‘Gosh, this economy is in pretty good shape,'” said Dan North, senior economist for Allianz Trade North America.
“The one thing that completely destroys that narrative is the inflation that consumers have had to deal with,” he told AFP.
North explains that as compared with January 2021, when price increases started ballooning, wages have cumulatively grown 18 percent.
But households have contended with larger overall upticks on expenses such as food, shelter and gasoline.
This is likely the reason that voters felt the economy is doing poorly despite job and wage growth, alongside relatively low unemployment levels.
“It’s been pretty hard to swallow,” said North.
Workers may have had 17 months of positive real wage growth, but they had 25 months of negative growth prior to that, ZipRecruiter chief economist Julia Pollak noted.
With people accustomed to positive wage growth prior to the coronavirus pandemic, many still feel like their salaries need to catch up, she added.
On Wednesday, US private sector hiring also surged past expectations, in a sign that the labor market remains resilient.
– Overreliance on credit –
Consumers are also turning to credit cards and dipping into their savings to fund spending, piling pressure especially on lower-income households and younger people.
Economists point to higher credit card delinquencies in recent years.
Credit card delinquency rates hit a near 12-year high in the first quarter this year, according to a report published in July by the Federal Reserve Bank of Philadelphia.
While analysts expect uncertainty surrounding the outcome of the US election could weigh on business investment in the fourth quarter, they do not anticipate a major impact.
The GDP growth figure is unlikely to sway the Federal Reserve’s interest rate decision much as well, Nationwide chief economist Kathy Bostjancic told AFP.
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