(Washington) Growth in American economic activity doubled in the third quarter, driven by household consumption, a new snub to the recession promised for months, and an additional argument for Joe Biden, campaigning for his re-election .
U.S. gross domestic product (GDP) growth was an annualized 4.9% for the three months from July to September, according to the Commerce Department’s first estimate, released Thursday.
This pace is even stronger than the 4.0 to 4.7% expected by analysts, according to several consensuses.
“I never believed that we would need a recession to bring down inflation,” responded President Joe Biden in a press release.
As usual, the Democrat, who hopes to be re-elected to the White House in 2024, attributed the merit of this solid growth to the measures put in place since his election: “It is a testimony to the resilience of consumers and workers Americans, supported by Bidenomics”, nickname given to his economic policy.
American households, in fact, continued to spend, thus fueling the main engine of the American economy.
However, they had to devote a large part of their budget to expenses for electricity, health care and medicines, financial services and insurance. They also bought computer equipment and traveled.
“Real estate investment has also rebounded,” notes Rubeela Farooqi, chief economist for High Frequency Economics, in a note.
Already in the second quarter, the expansion of the American economy had surprised by its strength, at 2.1% at an annualized rate, and 0.5% compared to the previous quarter.
The United States favors growth at an annualized rate, that is to say the growth that would be achieved over the entire year at this rate.
Other advanced economies simply compare each quarter to the previous, resulting in 1.2% for the US in Q3.
This is “explosive” growth, notes Kathy Bostjancic, chief economist at the Nationwide insurance company.
Will the much-heralded slowdown finally arrive?
Treasury Secretary Janet Yellen thinks the country can escape it: the situation “looks like a soft landing, with very good results for the American economy,” she said on Bloomberg on Thursday.
The famous “soft landing” is one that would slow inflation without causing the unemployment rate to soar or plunging the economy into recession.
“I don’t expect growth to continue at this rate. But we have good solid growth”, and the 2023 GDP should be “close to 2.5%”, anticipates Joe Biden’s Minister of Economy and Finance.
Growth should continue in the fourth quarter, but at a “significantly” slowed pace, also predicts Rubeela Farooqi, citing the “greater impact” of high rates “on consumers and businesses in the future”.
Inflation has been reducing the purchasing power of American households for two years. And the remedy could turn out to be even worse, since the American central bank (Fed) wants to voluntarily slow down growth, to ease the pressure on prices.
It has in fact raised its rates 11 times since March 2022. They are now at their highest since 2001. Result: the cost of credit has soared, and purchases have been slowed down.
Not enough so far, however, to stop the growth.
Because Americans have jobs, and therefore income. And the wealthiest households still have some of the savings amassed during COVID-19 aside.
But once again, the country is under the threat of a paralysis of the federal state, the “shutdown”, if the head of the House of Representatives, newly elected, Mike Johnson, does not manage to pass a budget for the federal administration.
Inflation in September was 3.7% year-on-year, according to the CPI index published by the Labor Department. The PCE index, the Fed’s favorite barometer, will be released on Friday.
By 2022, U.S. GDP growth had slowed to 2.1%, after experiencing its strongest rate since 1984 (5.9%) in 2021. And 2020 saw the largest decline in GDP since 1946 (-3.5%), with two months of recession due to COVID-19.
