US GDP shows growing economy even as recession risks mount

President Joe Biden hits back at economic 'doomsayers' as inflation remains at top of voters' minds before midterm elections

The US economy's bounceback prompted President Joe Biden to say it was 'never a good bet to bet against the American people'. AP
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The US economy bounced back in the third quarter of 2022 after six months of contraction, amid persistent high inflation and gloomy predictions, a preliminary report released on Thursday found.

US GDP, the most comprehensive indicator of economic activity, grew by 2.6 per cent between July and September, data released by the Bureau of Economic Analysis showed.

US President Joe Biden used the report to hit back against economic “doomsayers” who continue to speculate about a looming recession.

“As I have said before, it is never a good bet to bet against the American people,” Mr Biden said.

But he acknowledged that more work must be done to address the nation's historic inflation. The issue is expected to be a prominent concern for voters in next month's midterm elections.

The Federal Reserve has aggressively raised interest rates five times this year to fight chronic inflation, and is set to do so again next week and in December.

Fed chairman Jerome Powell has warned that its increases will bring “pain”, with higher unemployment and possibly a recession.

Previous data released by the bureau showed that the US economy shrank by 1.6 per cent in the first quarter of 2022, followed by a decline of 0.6 per cent in the second quarter.

The two consecutive quarters of economic contraction took the US into what is known as a “technical recession”.

But claims of a recession have been rebuffed by the White House and Fed, which pointed to other indicators.

The nation's 3.5 per cent unemployment is near a historic low and consumer spending remains resilient.

This puts Washington at odds with billionaires Elon Musk and Jeff Bezos, JP Morgan and former Treasury secretary Steve Mnuchin, who all have practically guaranteed a recession in 2023.

Chief among their concerns is Mr Powell's handling of the inflation crisis gripping the US.

With the costs of goods 8.2 per cent higher than a year ago and the war in Ukraine damaging supply chains, the central bank has raised its benchmark short-term interest rates to 3-3.25 per cent to lift borrowing rates and ultimately slow economic activity.

A strong GDP report was welcome news for Mr Biden and the Democrats, who are facing the prospect of losing control of Congress in the midterms.

Many voters will head to the polls on November 8 thinking about the economy.

With inflation still near a 40-year high, 44 per cent of voters said economic concerns are the most urgent facing the US, a New York Times/Sienna poll found.

And those who view the economy as their primary concern favour Republicans by a two-to-one-margin.

Voters' concerns have resonated with Mr Biden, who has spent weeks trying to contrast his administration's policies with that of Republicans, who he says will exacerbate soaring costs for Americans if they take control of Congress next year.

"I would argue it's reckless and irresponsible and will make inflation worse if they succeed," Mr Biden said in Syracuse, New York, later on Thursday.

Aggregate polling data shows the Republicans are expected to pick up enough seats to win control of the House of Representatives on November 8 and have a considerable chance at winning the Senate.

Updated: November 02, 2022, 2:57 PM