The US economy grew 2.8% in the second quartile of 2024, significantly exceeding analysts' expectations of 1.9%. The US economy grew at twice the rate in the first quarter, according to Commerce Department data released Thursday. three months of this year, when growth was 1.4%. Growth was faster than expected due to rising consumer spending and despite interest rates remaining high. However, growth still slowed down compared to 2023. The Commerce Department's upbeat data comes amid a presidential campaign in which voters list the economy as one of their top concerns. The fact that it is growing steadily, significantly outperforming other developed Western countries in terms of its indicators, may play into the hands of the Democrats, although it is far from certain that this will happen. The unemployment rate of 4.1% is low, but it is increasing. Economic growth is strong, but the pace has slowed compared to the boom seen when the country reopened after the covid pandemic. Although price increases have slowed, voters remain unhappy with the state of affairs as households grapple with the impact of a 20% jump in prices since 2021 and high borrowing costs. President Joe Biden's decision to drop out of the race further muddies the picture and complicates analysis of how the upbeat Commerce Department report could affect Democrats' election prospects. The US economy is recovering from a slowdown at the start of the year, when GDP growth was just 1.4%. In addition to strong consumer spending, the report showed rising business investment and higher export volumes. President Biden said the data "clearly shows that we have the strongest economy in the world right now." But University of Iowa professor Michael Lewis-Beck, creator of an algorithm that predicts votes based on economic growth and the president's approval levels, says economic growth in the first half of this year was not enough to offset Biden's unpopularity. Based on early-year growth rates, his algorithm predicted Biden would lose the election by a narrow margin to Republican nominee Donald Trump. Michael Lewis-Beck says that now that Biden's name is off the ballot, Democrats could find themselves in an even tougher position as they lose their edge as the party in power. However, he points out that in three elections after 1948, his algorithm was wrong – in 1960, 1968 and 1976. Then the elections, according to him, took place in the same “turbulent times” as now. “It’s not that economics didn’t matter then, but there were other important things,” he said. Other analysts believe Biden's decision to drop out of the race will give Democrats the opportunity to focus on the positive aspects of his legacy, while disavowing negative aspects such as inflation. “I see the benefit of Vice President Kamala Harris being the Democratic nominee because she can distance herself from President Biden on inflation,” said Danielle Deisseroth, executive director of the polling agency Data for Progress. She noted that many of the Biden administration's significant economic policies, including investments in roads, bridges, advanced technology and clean energy, are popular. “This is an opportunity to restart the economic narrative,” says the expert. What happens to the economy in the coming months will be important to the outcome of the election. The Federal Reserve, the US central bank, is widely expected to cut interest rates in September to prevent a further economic slowdown. Advocates for a speedy rate cut say the Fed must be proactive and take action before borrowing costs, at a 20-year high, push the economy into recession. But the decision to cut rates may be hampered by high GDP growth. According to Mark Zandi, chief economist at Moody's Analytics, the Fed now finds itself in a delicate situation: It values its political independence, and a rate cut that would make life easier for households with debt on loans and businesses looking to take out loans would be seen as working for Democrats. .
