US GDP resumes growth in Q3; Biden says the recovery is still moving forward

The United States economy growth resumed after contracting in the previous two quarters, giving the president a break Joe Biden before the mid-term elections, but the onset of a recession could only be a matter of time.

During the three months from July to September, the Gross Domestic Product (GDP) of the United States grew 2.6% at an annualized rate, according to the first estimate of the Department of Commerce Posted this Thursday.

Thus, the world’s largest economy is expanding for the first time since early 2022, and the rebound is stronger than expected, given that analysts had expected GDP growth of 2.3 percent.

US GDP shrank in the first two quarters of the year, falling 1.6% and then 0.6%, but not entering a recession, according to the Biden administration and many economists.

Because while these two consecutive quarters of falling GDP meet the commonly accepted definition of a recession, the strength of the labor market in particular does not allow the world’s largest economy to fall into this category.

The calculation of GDP at an annualized rate, a measure favored by the United States, compares with the previous quarter and then projects the evolution throughout the year.

The growth is 0.6% if you compare it simply with the previous quarter, the same as other advanced economies.

Economic recovery “keeps moving”: Biden

President Joe Biden said Thursday morning that the rebound in US economic growth in the third quarter is proof that the recovery is “moving on,” and said his administration must do more to lower prices for consumers. .

My government has passed laws that will lower prescription drug prices and health insurance premiums starting next year. We must do more,” Biden said in a statement.

Recession risks in 2023

This uptick is good news for Biden ahead of the November 8 elections, which could deprive him of his Democratic majority in Congress. In fact, the economic situation of the country has undermined the rebound that the Democratic field had until recently in the polls.

But the risks of recession persist for the coming months. Biden himself had mentioned earlier in the month the possibility of a “very mild recession.”

The theme is the inflationwhich remains close to its highest level in 40 years, at 8.2% in the 12 months to September in the United States, and reduces the purchasing power of households.

Above all because the remedy for this rise in prices is to slow down the economy by raising interest rates.

Mortgage or consumer loans now cost much more than before. Less consumption and less investment should cool down an overheated economy.

The Federal Reserve (Fed), the US central bank, is the one with the cards in hand to fight inflation. To do this, it is gradually increasing its rates, in order to encourage commercial banks to do the same when granting loans.

After four raises already, he should continue this momentum at his next meeting on Tuesday and Wednesday.

And the slowdown could be global as inflation is high in many regions. Several developed countries could enter a recession in 2023, such as Germany and Italy, recently warned the International Monetary Fund (FMI).