Why Americans Do Not See a Strong Economy

[Ptarmigan]

Why Americans Do Not See a Strong Economy
https://www.dlacalle.com/en/why-americans-do-not-see-a-strong-economy/

The euphoria with the fourth quarter Gross Domestic Product (GDP) figure makes no sense. The headline champions say that real GDP increased at an annual rate of 3.3% in the fourth quarter of 2023, according to the Bureau of Economic Statistics (BES). An increase in real GDP of $1.5 trillion with an increase in public debt of more than $2 trillion is not a strong economy. It is a bloated economy. Furthermore, there is nothing positive in consumption when personal saving as a percentage of disposable personal income was only 3.7% in December and disposable personal income in 2017 has basically stagnated. American consumers are buying fewer things with their salary.

We cannot forget that one of the biggest drivers of the fourth quarter increase in real GDP was an abrupt reduction in the GDP deflator, which came at 1.5%, less than half the previous reading of 3.3%. This is a massive boost to real GDP from a reduction in the inflation estimate that most Americans have not seen at all.

Credit card debt is at an all-time high, and Americans are taking longer to pay their balances. The percentage of Americans who are in financial distress due to credit card debt has reached the same level as during the Great Recession, according to the Federal Reserve Bank of St. Louis report “Share of Americans in Financial Distress Reaches High Levels” (December 26, 2023, J. M. Sanchez, M. Mori).

The evidence of real economy stagnation is also clear in the Gross Domestic Income figure, which shows why U.S. citizens see the economy in recession when official real GDP tells us a different picture. The annual growth of real gross domestic income, with the latest figure, stands at -0.1%. The BES will not publish the fourth quarter until the next GDP revision, but if previous trends continue, the real GDI may continue to signal recession.

The same happens with inflation.

America's GDP grew at 3.3%. The truth is the economy is weak. Credit card debt is very high.