JP Morgan AM: Expansionary fiscal policy is supporting the US economy

JP Morgan AM: Expansionary fiscal policy is supporting the US economy

October 9, 2023

United States
Amerika (01)

The US economy remains resilient, despite facing more than 500 basis points of interest rate rises over the past 18 months. Real GDP grew at an annualised 2.1% in Q2 of this year, and the unemployment rate has sat below 4% since the start of 2022.

Alongside a healthy consumer, robust government spending has been a key part of this resilience. The deficit is above 7% of GDP, a level rarely seen outside of recessions when unemployment is usually more elevated.

Part of the deficit can be attributed to rising interest costs, but programmes like the JOBS, CHIPS and Inflation Reduction Acts, the student loan moratorium, and state-level tax breaks are also pushing up government consumption. With student loan repayments restarting and some tax breaks ending, the withdrawal of part of this support may contribute to a slowing of the US economy.

09102023 JP Morgan AM

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