WASHINGTON – The US economy is resilient, and it’s bad news for US President Joe Biden.

Given time to digest April 25’s gross domestic product (GDP) report, most economists looked past the weak headline number and declared the underlying momentum of the US economy remained strong. But growth and jobs – which have been surprisingly sturdy for more than a year – have generated little tangible benefit to Mr Biden’s hopes for re-election.

What they did generate was more of the one thing that has truly stung Mr Biden: inflation.

“This is a lose-lose for the President,” said Mr Stuart Paul, an economist at Bloomberg Economics. “He doesn’t get to realise the benefit of the hot growth because it’s coming at the cost of high inflation and interest rates. This economic resilience is – borderline – a problem for Mr Biden.”

The report comes at a perilous time for the president’s campaign. Americans were already sour on economic conditions, and research suggests that voters begin to make up their minds about the direction of the US economy about six months before an election – right about now.

A Bloomberg News/Morning Consult poll of voters in seven battleground states in April showed that more than half expect the US economy to be worse by 2024. And at least half of voters say they expect the inflation rate and borrowing costs to rise even higher than they are now.

As a result, the Biden campaign has largely retired the “Bidenomics” branding that used to define his economic case for re-election, and is emphasising issues like abortion rights and protecting democracy.

Even though Mr Biden has been inundated with unfavourable polls showing him trailing former US president Donald Trump in key states and predicting a November general election loss, at least one widely trusted economic model offers him hope.

Economist Ray Fair of Yale University said his model shows economic fundamentals suggest Mr Biden remains on track to win the popular vote even amid decelerating growth and persistent high inflation. The model, which has been mostly successful in predicting the outcome of presidential elections since 1980, implies a 51.7 per cent vote share for Mr Biden head-to-head against Trump.

Inflation revived

How different it seemed just three months ago. An aggressive campaign of interest-rate increases by the US Federal Reserve appeared finally to be bringing inflation to heel. After peaking above 7 per cent in June of 2022, the US central bank’s favourite gauge of prices, the personal consumption expenditures index (PCE), tumbled all the way to 2.4 per cent in the 12 months through January.

Remarkably, the drop in inflation came without damaging growth or employment. GDP outpaced all predictions by expanding 2.5 per cent in 2023, and unemployment wowed forecasters by remaining below 4 per cent.

Unfortunately for Mr Biden, the decline of inflation in the US now looks badly derailed. Monthly inflation figures since January have largely flattened. And the April 25 report showed that core PCE – which excludes volatile food and energy – rose by an annualised 3.7 per cent in the first quarter, its first acceleration in a year.

More detailed data released on April 26 that focused on March confirmed the view that inflation pressures were persisting, dashing any hopes the Fed might soon cut interest rates and thereby lower borrowing costs for households and businesses.

As recently as April 10, Mr Biden stood by his prediction that the Fed would cut rates – which stand at a two-decade high – before the end of 2024. Yet with the latest economic data in hand, policymakers are expected to delay rate reductions and may even reconsider whether borrowing costs are high enough.

It’s also getting harder for Mr Biden to avoid getting blamed for rising prices. At its peak, inflation was clearly driven by the supply-side snarls triggered by the Covid-19 pandemic. Those problems have largely been resolved. What remains appears more linked to demand, driven in part by deficit spending.

Mr Biden helped usher a series of measures through Congress during his tenure that intends to bolster American manufacturing, renew infrastructure and fight climate change.

According to Mr Jason Furman, a former adviser to ex-US president Barack Obama, those programmes have a chance to accomplish all that in the longer term, making them solid investments. But in the short term, the giant price tag is doing two things: It’s adding to growth, for which Mr Biden gets little credit, and it’s spurring the inflation that damages his standing.

“If there was a huge spending programme to dig and refill holes, the macroeconomic impact would probably be pretty similar to what we’ve seen,” he said.

This is a devilish combination for Mr Biden, who has tried hard to make the case for why “Bidenomics” has helped the average American.

“The administration can certainly spell out a case for why their policies, along with legislation passed by Congress, has laid the groundwork for spurring this post-pandemic economy,” said Washington’s Brookings Institution senior fellow Sarah Binder.

But, she added, with inflation dominating Americans’ experience of the economy, and also because of the polarisation that has divided the electorate, he’s getting little credit.

“Declining inflation and interest rates would be good for voters and for President Biden,” said Bloomberg Economics’ Mr Paul. “But the thing that would get the Fed to cut rates is really bad economic data.” BLOOMBERG