President Joe Biden eagerly and perhaps foolishly took a victory lap after figures from the Bureau of Economic Analysis showed the U.S. economy expanded by 2.9% in 2022’s fourth quarter and 2.1% for the year.
However, much like hurricane warning flags on a sunny day, there are alarms pointing towards a drastic economic downturn. And these warnings have not been seen since the Great Depression paralyzed the nation.
According to the Heritage Foundation’s EJ Antoni, economic growth is putting on the brakes. Even sectors that underpinned the rise in the gross domestic product are not positive signs for the nation’s economic health.
Antoni specifically pointed toward business investment, which grew by only 1.4% in the fourth quarter and was almost entirely confined to expanding inventories. Nonresidential investment inched higher by just 0.7%.
"No regrets" over classified documents. A "secure" border. "Zero" inflation. Recession denialism.
Welcome to the Biden Administration. pic.twitter.com/4UJxHMfiSb
— Kevin Kiley (@KevinKileyCA) January 24, 2023
As for the all-important residential investment sector, that “fell off a cliff,” according to the research fellow. Antoni noted that figures plunged 26.7% “as consumers were unable to afford the combination of high home prices, high-interest rates, and falling real incomes.”
The U.S. showed a rise in net exports, but that came as a result of a sizable downturn in international trade. Antoni observed that “imports are simply falling faster than exports,” which creates the illusion of growth.
The most concerning of all the numbers is the drastic decline in real disposable income in 2022. That topped $1 trillion, which is the second-largest percentage fall on record.
The number one drop came in 1932, the year the Great Depression sank to its lowest point.
U.S. consumers last year spent their savings and what was left of stimulus checks from the previous two years. The nation’s savings level fell $1.6 trillion to dip below 2009 levels.
Meanwhile, consumer debt skyrocketed as many used credit cards to make ends meet in these inflationary times. And with higher interest rates translating into higher borrowing costs, it is probable that growth in consumer spending will continue to decline.
Consumer spending is the engine that drives the economy, which makes this even worse news for the U.S. economy.
Biden makes a habit of claiming victory when there is no victory to be claimed. His trumpeting of a small rise in the economy ignored drastic warning signs that rough sailing is on the horizon for American consumers, who may need to make serious adjustments to ride out the storm.