The US will not follow Britain and Japan into recession because of a fundamentally stronger recovery that has enabled healthy consumer spending, with Biden administration spending on infrastructure and clean energy fostering business investment, White House economic adviser Lael Brainard said on Thursday.
Brainard told reporters at an economics conference that continued US growth would help to support the global economy, including for developing countries.
“Because inflation has come down so quickly, we anticipate the environment to be quite benign” for the US, said Brainard, the director of the White House’s National Economic Council.
New data on Tuesday showed that both Britain and Japan unexpectedly slipped into recession, with GDP falling in the fourth quarter after third-quarter drops. Consumer spending in both countries remained weak.
Brainard attributed the stronger US position to the passage of the Biden administration’s initial COVID-19 rescue package, which enabled Americans to get back to work sooner and helped small businesses.
Record business creation, with 16 million applications in the past three years, and Biden administration investments in infrastructure, semiconductors, and clean energy “are going to continue to provide a strong positive investment environment for the business investment,” she said.
Along with stronger workforce participation and productivity improvements, these factors could help pave the way for durable longer-term growth, Brainard said.
Brainard, a former vice chair of the Federal Reserve, continued the Biden administration’s efforts to promote its investment policies, arguing that they have enabled the US economy to defy last year’s forecasts of a recession.
But the administration’s repeated efforts to showcase its economic successes have so far failed to persuade an American public still stung by high post-pandemic inflation, raising concerns for Democrats as President Joe Biden seeks a second White House term in the Nov. 5 election.
PRICES STILL TOO HIGH
Brainard acknowledged that Americans are “fed up” with high prices for everyday purchases such as many food products and housing, and said the Biden administration would seek to push them down by cracking down on deceptive pricing practices such as shrinking package sizes and “junk fees” charged by some services providers.
Brainard declined to comment directly on the release on Thursday of US retail sales data that showed a larger-than-expected drop in January. She said, however, that consumers are becoming more discerning about their purchases, and that can prompt some retailers to cut prices.
The US economy is healthier than forecast a year ago, stronger than the same stage of previous recoveries, and better on growth and inflation than other advanced economies, with headline and core inflation near 2% for the past six months, Brainard said.
Inflation has declined even as growth was around 3% in 2023 and unemployment remained below 4% for two years, the longest stretch since the 1960s.
“Looking to history, we have never had a year where inflation has declined this fast, alongside robust growth and a stable, low unemployment rate,” Brainard said.
