US Growth Shatters Expectations

The U.S. economy is outperforming expectations with a 3.1 percent growth in 2023, defying earlier predictions of a recession. This positive economic news is being leveraged by the Biden administration to counter one of the key criticisms from former President Donald Trump. Commerce Department’s report reveals robust fourth-quarter growth, prompting White House economic adviser Lael Brainard and Treasury Secretary Janet Yellen to emphasize that President Biden’s strategy for the middle class is proving successful.

Yellen, in a speech in Chicago, emphasized the interconnectedness of the middle class and the economy, attempting to highlight the positive impact of Biden’s policies. However, Biden’s team faces an uphill battle as Trump consistently outperforms the current president in polls related to the economy. The potential resurgence of inflation remains a concern, driven by robust growth and unforeseen shocks like conflicts in the Middle East affecting global oil prices.

Despite these challenges, Biden’s camp is optimistic. Consumer sentiment, as measured by the University of Michigan, has surged, and the economy’s sustainability is seen as a critical factor for this year’s elections. The positive GDP numbers are attributed to strong consumer spending, indicating that households are maintaining their spending habits. Yellen contrasted Biden’s approach with Trump’s, criticizing the latter’s strategy of cutting taxes for the rich.

While the positive GDP figures are encouraging, challenges persist, such as the rising costs of essential items like food and housing, which could impact public perceptions. Additionally, the economic outlook for 2024 is more conservative, with slower growth projected. Higher debt costs could influence unemployment, although it has remained below 4 percent for two years.

Gregory Daco, chief economist at EY-Parthenon, cautioned against relying too heavily on monthly consumer sentiment numbers, which can be volatile. Nevertheless, the latest data provides a boost to the positive economic trend. Democrats are quick to highlight the average annual GDP growth during the first three years of the Biden administration, surpassing that of the Trump administration.