U.S. gets its first big economic report card after Biden drops his campaign

Transcript

AILSA CHANG, HOST:

The U.S. economy is humming along. New GDP numbers released today showed growth at what many people would consider a stellar pace. The health of the economy always looms large for voters, of course. So the report should be great news for President Biden and Vice President Harris. But the reality is a lot of Americans are not feeling it. To unpack these numbers and what they mean is NPR's Maria Aspan. Hey, Maria.

MARIA ASPAN, BYLINE: Hey, Ailsa.

CHANG: The thing is this report card really does seem good, right?

ASPAN: It really is, Ailsa. It was strong growth. The economy grew at an annual rate of 2.8% in April, May and June. That's much better than the beginning of the year, and it's much higher than expected. There were a lot of bright spots, too. Consumer spending, which makes up more than two-thirds of GDP, was very strong. Businesses are spending more. The government is spending more. I called Jay Bryson, chief economist at Wells Fargo, and this is how he put it.

JAY BRYSON: It's well-balanced sort of growth. It's not too much in one sector. It's well-balanced, and that's a good thing. That's what you'd like to see.

ASPAN: The White House definitely likes to see it spread out like that. President Biden put out a statement this morning saying this GDP report makes clear we now have the strongest economy in the world.

CHANG: OK. So if this is the strongest economy in the world, why are so many people still unhappy about it?

ASPAN: That is the question.

CHANG: Yeah.

ASPAN: There are still a lot of asterisks. A big one, of course, is inflation. It has come down considerably since the pandemic, but the effects are still pretty stubborn. You see it at the grocery store. We're paying a lot more, and we're getting a lot less.

CHANG: Sure.

ASPAN: Then, of course, there are interest rates. It's just still really hard to buy a house right now, and some of that is home prices are so high, and some of it is that it's just really expensive to get a mortgage. So these are some of the reasons why Biden and Harris just aren't getting a lot of credit for the economy. And really, the truth is there's only so much they can do to control inflation or to bring down interest rates. That's really up to the Federal Reserve.

So now, as it becomes increasingly likely that Harris is going to be the Democratic nominee, she's the one who has to convince voters not only that she can keep the economy strong, but that she can make us all feel better about it, too.

CHANG: A totally separate task. Well, you mentioned that it's up to the Fed to really fix all of this. So how will today's numbers affect their decisions, do you think?

ASPAN: Yeah. We are all still waiting on the Fed to lower those interests rates. They're a killer. It's just still really expensive to get a loan, to buy a house, to buy a car, to make any of those big financial decisions that can affect or change our lives. But at the end of the day, policymakers don't want to cut interest rates until they're sure they can get inflation under control.

The good news with this latest report is that the economy is still growing as inflation continues to ease. We are still waiting to hear more from the Fed, and they'll probably start slow, but things are looking up, and it does seem likely that the Fed could start cutting interest rates this fall, perhaps even as soon as September. That could be a relief for borrowers, and it will definitely be welcome news for the White House.

CHANG: That is NPR finance correspondent Maria Aspan. Thank you so much, Maria.

ASPAN: Thank you so much, Ailsa. Transcript provided by NPR, Copyright NPR.