In what spells trouble for President Joe Biden’s 2024 reelection ambitions, the U.S. economy has delivered a less-than-promising performance, according to the latest GDP figures. These numbers have fallen considerably short of expectations, stirring memories of the dreaded 1970s stagflation, and compounding worries about a potential economic downturn under Biden’s watch.
The GDP growth, anticipated to hit 2.4%, has instead staggered to a meager 1.6% rise. This disheartening update surfaces as inflation continues its relentless climb, putting additional pressure on the Biden administration’s attempts to steer the economy toward stability.
Fox News Business experts have highlighted the concerning mix of sluggish growth and stubborn inflation. They echo the Federal Reserve’s recent warnings that inflation is becoming increasingly entrenched and moving in a troubling direction. Analysts are sounding the alarm about the risk of stagflation—a toxic cocktail of tepid economic growth, high unemployment, and escalating prices—which could severely undermine Biden’s campaign efforts as economic performance remains a critical factor for voters.
Fox News Business’s David Asman expressed his concern on air, stating, “I was preparing myself for using the word ‘stagflation’ because that’s something we haven’t seen since the 1970s.” He drew a stark comparison to the economic challenges that famously hampered the Carter administration, suggesting a similar fate could await Biden if trends don’t reverse.
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The current economic landscape is characterized by a disappointing slowdown in growth, as the first quarter of 2024 saw real GDP expanding by just 1.6%, a stark slowdown from the 3.4% growth seen in the preceding quarter, based on preliminary figures from the Bureau of Economic Analysis.
Despite some positive contributions from consumer spending and increased investments in both residential and commercial sectors, these were offset by reductions in private inventory investment and a rise in imports, which detracted from the overall GDP. Notably, consumer spending in areas such as healthcare and financial services was up, though spending on goods like motor vehicles and energy products declined. The overall current-dollar GDP rose to $28.28 trillion, a $327.5 billion increase from the previous quarter. However, both the GDP price index and the personal consumption expenditures (PCE) price index escalated, signaling intensified inflation pressures, with the PCE price index excluding food and energy climbing to 3.7%.
Personal income also saw gains primarily through higher wages and government transfer payments, which contributed to a rise in disposable income despite an increase in personal taxes. Yet, the personal saving rate showed a slight decrease from the last quarter.
This “advance” GDP estimate, which is subject to revision in a more detailed report due on May 30, 2024, reflects a decelerating economy amidst persistent inflation. This scenario has shifted expectations regarding the Federal Reserve’s timeline for interest rate adjustments, with officials suggesting that high rates may need to be maintained longer to combat inflation.
As the campaign season intensifies, Biden’s team is expected to tweak their economic messaging in an effort to calm a worried electorate. However, economists caution that without substantial policy changes, the U.S. may be headed for a prolonged economic struggle, echoing the need for a rigorous reassessment of the current economic strategy to ward off lasting damage.
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