Donald Trump’s presidential campaign warned Thursday that “stagflation is a real possibility” under President Biden after economic data showed America’s real Gross Domestic Product (GDP) increased by just 1.6% in the first three months of this year.
The Commerce Department’s Bureau of Economic Analysis released the troubling statistic, which came in far under the 2.4% forecast by economists.
“[N]o amount of deflection will change the fact that those suffering the most — middle-class working Americans are looking for a new direction and believe that only President Donald Trump can fix the current economic crisis,” read a memo from top advisers Susie Wiles and Chris LaCivita.
“With 1.6% GDP, far short of the 2.5% forecast, coupled with rising inflation — stagflation is a real possibility,” they added, using the portmanteau of “stagnation” and “inflation” commonly associated with periods of high prices and low growth in the 1970s.
Trump himself told reporters outside his criminal trial in Manhattan Thursday: “Gasoline is going way up, energy costs are going way up and the stock market is in a sense crashing. The numbers are very bad.”
“This is Bidenomics,” the 45th president needled his opponent, referencing White House economic messaging that surveys showed fell flat with potential voters.
Seven in 10 voters from seven battleground states told a Bloomberg/Morning Consult poll released Wednesday that they felt the US economy was headed in the “wrong direction,” with a majority of voters also having an unfavorable opinion of Biden.
House Budget Committee chairman Jodey Arrington (R-Texas) blamed “Democrats’ reckless spending and President Biden’s failed economic policies” for the “shockingly low” numbers and 3.5% surge in consumer prices for the 12 months ending in March.
“When you overstimulate demand with massive federal spending and — at the same time — constrain supply with increased taxes and regulations, you get inflation, interest rate hikes, and a weak and receding economy,” said Arrington.
Sen. Martin Heinrich (D-NM), who chairs Congress’ Joint Economic Committee, acknowledged the slow growth but argued there were some bright spots.
“Unemployment remains low and real wages are up and growing faster than prices,” Heinrich said. “At the same time, high interest rates and tighter credit conditions are weighing on families. That’s why Democrats are continuing to work to make housing more affordable and lower the cost of child care, health care, and prescription drugs.”
In fact, real wages were slightly outpaced by price increases, according to the latest US Bureau of Labor Statistics report, while the unemployment rate has hovered between 3.7% and 3.9% since last August.
Federal Reserve chair Jerome Powell announced earlier this month that “recent data have clearly not given us greater confidence” about inflation — adding the nation’s central bank would put off any immediate interest rate cuts.
“In terms of the components, consumption above expectations and business investment below — which is roughly what you would expect with substantial fiscal support being partly offset by high interest rates,” said Jason Furman, former National Economic Council director under President Barack Obama.
“Nominal GDP grew at a 4.8% annual rate,” Furman added. “The second lowest quarter since COVID hit but still above a pace that is consistent with the Fed’s 2% target.”
Biden, 81, brushed off the worse-than-expected GDP report, declaring in a statement that “the American economy remains strong, with continued steady and stable growth.”
“But we have more work to do,” the president admitted. “Costs are too high for working families, and I am fighting to lower them.”