У The latest Gallup poll, published Wednesday4 out of 5 adults rated current economic conditions as just right or bad, and more than three-quarters of Americans say the economy is deteriorating. The index of economic confidence has declined since last July and is now worse than in April 2020, at the start of the pandemic.
Voters from both parties will hold President Joe Biden and Democrats accountable for whether things are going right or wrong, said Sarah Binder, a professor of political science at George Washington University.
“Slow growth – potentially still coupled with high inflation – will inevitably complicate the president’s party’s victory in the election,” Binder said on Wednesday, before the latest figures were released. “With a low majority and a drop in Biden’s popularity, there is a high risk that Democrats could lose control of both houses.”
The White House was leaning towards criticism.
A senior administration spokesman said in an interview Wednesday that the quarterly decline would be largely due to two technical factors – a large increase in the trade deficit as imports grew and a significant slowdown in stockpiling – and did not indicate a weakening economy.
A report on Thursday showed that the trade deficit cut 3.2 percent in the first quarter, while declining investment in inventories fell 0.84 percent.
Under the hood, the economy still looks very strong, a senior official said Wednesday.
According to the latest report, final sales to domestic private buyers, a figure often cited by economists as a true reflection of the underlying health of the economy, rose 3.7 percent. Consumer spending rose 2.7 percent, gross private investment rose 2.3 percent, and housing investment rose 2.1 percent.
In fact, demand was so strong that domestic production could not keep up, forcing businesses to import more goods from abroad, Amherst Pierpont chief economist Stephen Stanley said on Wednesday.
“This is what an overheated economy looks like,” said Joe Bruevalos, chief economist at RSM US LLP, after the publication of GDP data.
A quarter of negative growth does not mean that the US economy is in recession – this definition is adopted by a group of experts from the National Bureau of Economic Research and takes into account data for many months. However, Wells Fargo economists Jay Bryson and Shannon Siri said in a note to customers on Wednesday that “the likelihood of a recession next year is not insignificant.”
All in all, this is something one can expect or even hope to see when politicians try to cool an overheated economy, said Tony Frata, a former White House spokesman for President George W. Bush and now a partner at Hamilton Place Strategies.
“The recipe, if you have full employment and inflation, is to take the foam out of the economy for a while,” Frato said on Wednesday. “But the policy of negative growth, even during the quarter – at this time, in the year of the by-elections – is really very risky for the White House.”
Democrats need to be prepared to fight Republicans, ready to kill them because of the slowdown that, combined with high inflation and rising interest rates, could start to feel more like a malaise, he added.
“They will not talk about stocks,” he said of the Republican Republic. “They will just talk about how the Democrats’ high spending has caused inflation and a slowdown in the economy, and now it will only get worse.”
Republicans jumped to the news.
“Accelerating inflation, the workers’ crisis and the growing risk of a significant recession are significant economic failures of the Biden administration – and are likely to be even worse,” the spokesman said. Kevin Brady Texas, a senior Republican on the House Committee on Issues and Means.
A senior Biden administration official cited a message Wednesday from Jason Furman, former chairman of President Barack Obama’s Economic Advisers Council, explaining why technical factors in the first quarter masked key economic forces.
But one analyst said such reports from the White House would not work.
“Whenever you rely on 12 tweets from Jason Furman to explain why the economy is actually better than it seems – especially when GDP is already an abstract thing that people don’t necessarily feel intuitively, unlike inflation – I think that it makes the story they’re trying to tell now even tougher, ”said Liam Donavan, director of Bracewell LLP and a former Republican. “There are still a lot of indicators that can give good news. The last thing they need is further bad news. “