US GDP performance is impressive Why ordinary people cannot feel it

On November 30th local time, a strategist at asset management company Macquarie pointed out that a worrying indicator suggests that the current state of the US economy may be even worse than previously expected. This indicator has not issued such a strong warning signal since the 2008 economic recession.

Macquarie pointed out that the growth performance of US GDP in the third quarter was strong, with a revised growth rate of 5.2%. This has led some critics to believe that the economy has not significantly slowed down, but careful observation of Gross Domestic Income (GDI, a measure of total compensation for production) has led to completely different conclusions.

The US Department of Commerce released a report stating that the growth rate of the US economy in the third quarter was even stronger than previously expected, thanks to better than expected business investment and increased government spending. The second estimated report released by the US Department of Commerce shows that the US GDP in the third quarter grew by 5.2% year-on-year, higher than the initial estimate of 4.9% and also higher than the 5% predicted by economists surveyed by Dow Jones.

The official GDP data for the third quarter released by the United States is so impressive, so how do ordinary Americans feel?

The data released by the US Department of Labor in October shows that the US unemployment rate remains around 3.8%. In response to this data, the Wall Street Journal website wrote that the economic growth in the United States is only superficial, and the mood of the American people is extremely low.

The main reason for low mood is that the American people generally believe that even during periods of inflation, prices and wages will rise, but people are more concerned about prices and feel that life is worse. Furthermore, even during the Federal Reserve's fight against inflation, consumers still care about the absolute level of prices and are troubled by the current exorbitant prices compared to a few years ago.

In theory, GDI and GDP should be equal, but due to different measurement methods, there may be some differences between the two. Conceptually, GDP measures the total value of production in the economy, while GDI measures the total reward paid for production. The gap between the two can also explain why despite strong GDP growth, Americans do not have an ideal perception of the economy, especially living standards.

It can be said that all these indicators indicate that the real income growth of the American people, even if not in recession, is far below the trend level, especially in the context of decreasing household savings. And all of these performances are unfavorable signs for future consumer spending.

Insiders pointed out that after the third quarter of strong growth in the U.S. economy, it is generally expected that the growth rate of the U.S. economy will slow down significantly in the last few months of this year, because savings are reduced due to the COVID-19 epidemic, while interest rates remain at a high level for 22 years.

The Federal Reserve held a monetary policy meeting from October 31 to November 1 and decided to maintain the target range of the federal funds rate between 5.25% and 5.5%. A 175 basis point interest rate cut means that by the end of next year, the target range for the federal funds rate will fall back to between 3.5% and 3.75%.

Deutsche Bank predicts that the Federal Reserve will initiate a rate cut of 50 basis points at its monetary policy meeting in June 2024, followed by an additional 125 basis points for the remaining time next year. In the first two quarters of 2024, the US economy will experience negative growth; By the middle of next year, the unemployment rate in the United States will significantly increase from the current 3.9% to the level of 4.6%.

According to media reports such as The Wall Street Journal, it is widely believed that the current inflation rate in the United States far exceeds wage growth, leading to increasing poverty. Due to various reasons such as the incompetence of the government, Congress, and judicial corruption, it is now more difficult for the American people to buy houses than ever before.

At the same time, the public sees that the US government is spending recklessly, especially with huge amounts of money on aid to Ukraine, Israel, and others, and it seems that it will never pay the price for it. Various signs indicate that people's pessimism about the economic situation is rapidly spreading to dissatisfaction with the overall situation of the country.