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Solid Growth Amid Economic Concerns
The American economy continues to report robust growth, with another quarter of solid expansion anticipated. A report is due on Wednesday, just before the much-anticipated presidential election. Despite these positive figures, it remains uncertain if this data can sway voters weary of inflation.
Economic Performance: A Contrast in Perspectives
The economy, on paper, appears in fine fettle. Analysts, like Dan North from Allianz Trade North America, point to healthy numbers in GDP growth, income, consumption, and employment. However, the inflation consumers have faced undermines this narrative. The economy is projected to expand by an annual rate of 3.0 percent in the third quarter. This pace mirrors that of the previous quarter and surpasses forecasts for Germany, France, and the United Kingdom, according to International Monetary Fund estimates.
Voter Sentiment and the Election
Amid spending surges, American consumers remain pessimistic about their financial prospects. This mood casts a shadow over Democrat Kamala Harris, who lags behind Republican Donald Trump in opinion polls regarding economic issues. An October poll from the New York Times/Siena College highlights that 52% of respondents trust Trump over Harris (45%) to handle the economy better.
Inflation: A Bitter Pill
Inflation remains a formidable challenge. Since January 2021, prices have surged while wages cumulatively grew by 18 percent, explains North. Expenses like food, shelter, and gasoline have increased by 22 to 29 percent, making it hard for voters to see economic progress. Despite low unemployment rates and job growth, workers feel their wages need to catch up, a sentiment intensified by the 25 months of negative wage growth before 17 months of positive real wage growth.
A Reliance on Credit and Savings
Many consumers are resorting to credit cards and savings to fund their lifestyles. This has led to a worrying rise in credit card delinquencies, reaching a near 12-year high earlier this year, as reported by the Federal Reserve Bank of Philadelphia.
Business Investment and the Election
The primary driver of GDP growth remains consumer spending, supported by business investment, notes Michael Pearce of Oxford Economics. Although election uncertainties might temper business investments towards the year’s end, its impact is expected to be minimal. Additionally, the growth figure is unlikely to influence the Federal Reserve’s upcoming interest rate decision.
Final Thoughts
The US economy’s current performance could mask underlying issues faced by everyday citizens. As the election looms, it is unclear whether expressed concerns over inflation and economic management will sway voter decisions.
Published By: Girish Kumar Anshul
Published On: Oct 30, 2024
