US Economy Sees Sharp Slowdown; Could This Affect Biden's Re-Election Campaign?

The U.S. economy grew at an annual pace of just 1.1% in the first quarter of 2023, the Bureau of Economic Analysis (BEA) estimated Thursday, which is below the 2% growth expectations. This raises questions about how the slowdown in the world's largest economy could affect President Joe Biden's 2024 re-election bid.

The economy saw a 2.6% annual growth rate in the last quarter of 2022.

The slowdown of the U.S. gross domestic product (GDP) was affected by slumping inventories, while growth was driven by increasing consumer spending, the agency said in its report Thursday. A Bloomberg survey set the GDP growth forecast for the first quarter at 1.9%, while other economists were expecting at least a 2% expansion.

Despite the GDP slump, the agency said services grew by 2.3% in the first quarter, which is driven by the hotel and healthcare sectors. Goods spending rose by 6.5%, marking the highest growth in nearly two years.

The latest numbers suggest that the Federal Reserve's interest rate hikes have already started taking a toll on economic growth.

Commenting on the growth figures, Biden said, "Today, we learned that the American economy remains strong, as it transitions to steady and stable growth. This past quarter, real personal disposable income increased and American consumers continued to spend, even as the overall pace of growth moderated."

While the president appears to be upbeat about the future of the U.S. economy, Wall Street banks and many economists have predicted a downturn. They say the figures indicate a recession is looming.

"This morning's data was the worst of both worlds, with growth down and inflation up," Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, told Bloomberg.

"We see and our experts see a mild recession coming," warned Brian Moynihan, CEO of Bank of America.

Wells Fargo CEO Charlie Scharf shared the same sentiments, stating that the bank expects economic growth to slow "and we are preparing for a range of scenarios."

Former Treasury Secretary Larry Summers, a Biden ally, has also warned that the U.S. economy will have to decline further before an inflation breakthrough takes place.

"I think we're going to have difficulty getting near a 2% inflation target until and unless the economy slows down substantially," Summers said last week, Politico reported.

The BEA report came just days after Biden announced his presidential re-election bid. Some observers note that the numbers could have a negative effect on the POTUS' political goals.

Recession fears and voters still feeling the brunt of inflation may come into play as the Democratic leader sets his eyes on next year's presidential race.

Biden did say in his re-election pitch that while there are many people "who look at the economy through the eyes of Wall Street," he's not one of them.

The Biden administration did achieve some job growth highs, but inflation continues to be a bane in the White House's bids to reassure the public and economists that a recession is not coming soon.

The POTUS may have "worse cards in 2024," as unemployment is expected to rise due to slower growth and interest rates well above pre-pandemic numbers, according to Reuters.

Apart from that, polls conducted ahead of Biden's re-election bid announcement showed that confidence in his leadership has slumped in recent months.

An NBC News poll found 70% of respondents did not want Biden to run for president again. Only 26% believed he still has what it takes to lead the nation. Half of the respondents who were not in favor of another Biden presidential bid said age was a "major" reason. "It is someone else's turn," said one respondent, who was a Democratic Party supporter. Biden is the only U.S. president to turn 80 while in office.

The poll also showed that 60% of Americans don't want ex-president Donald Trump to make another presidential bid and only 35% want to see him give it another try.

According to a CNN poll, Biden's approval rating was 37% on his handling of the economy and 35% in his government's management of immigration. Only 32% said he should make another run for the presidency, with only 26% from the young adult demographic wanting to see him in the 2024 race. Also, 54% of Democratic or Democratic-leaning independent registered voters said they prefer a different nominee to represent the party in the 2024 elections.