Why a great economic report could mark the peak of ‘Bidenomics’

What economists expected

It exceeded the expectations of some economists, but turned out to be worse than others. The Federal Reserve Bank of Atlanta’s GDPNow model estimated that the economy grew 5.4 percent in the third quarter.

Still, data showed the economy was growing at its fastest pace in almost two years.

Wells Fargo economists said ahead of the release that the resilience of the U.S. economy would likely be on full display.

As a result, the Treasury Department released a report on Thursday that said the U.S. economy not only performed better than expected this year, but also helped maintain the global outlook.

The progress we have made on economic growth, labor markets and inflation is being seen around the world and remains an important source of strength for the global economy, said Acting Deputy Secretary of the Treasury Eric Van Nostrand and Deputy Assistant Secretary Tara Sinclair.

Sounds great! Do voters feel it?

If that’s the case, they don’t have high regard for President Joe Biden. His economic approval ratings remain negative by double digits, including his handling of inflation. More than half of people surveyed in an Economist/YouGov poll conducted October 21-24 said the economic situation was getting worse.

What could go wrong?

Economists expect economic growth to slow next year.

Borrowing costs are rising, pandemic-related financial buffers are being depleted, and student loans are emerging, not to mention hot wars taking place in the Middle East and Ukraine. The word among CEOs is that they are not thrilled with what’s in store for the economy next year.

He emphasizes that the third quarter GDP data may be excellent, but it is an outdated picture.

So the question is: To what extent will the Jerome Powells-led Fed act on new statistics that may suggest more work is needed to address inflation? The Fed is expected to keep interest rates unchanged at its meeting next week.

This is where I consistently feel the tension between the Fed, which has been and continues to be extremely data-dependent and ultimately backward-looking, and what would be optimal in current conditions, which is forward-looking, Gregory, Chief Economist at EY-Parthenon Daco said on Wednesday.

According to Daco, a key issue is whether consumers and business leaders still have the buffers necessary to sustain spending through 2024 in an environment of persistently high costs and high interest rates.

In my opinion, the answer to this question is no, he said. However, depending on how you answer this question, you will want to adopt a more or less hawkish approach to monetary policy.