The Economy Is Outperforming in Swing States — It’s Good News for Harris

(Bloomberg) - Six of the seven battleground states expected to decide this year's US presidential election saw faster growth than the US economy as a whole in the second quarter, adding to recent tailwinds for Vice President Kamala Harris close to a month out from the vote.

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Particularly notable was a bounceback in the key "blue wall" legacy industrial states. Growth in gross domestic product adjusted for inflation in Michigan and Wisconsin was among the 10 fastest in the country, and Pennsylvania rebounded after contracting in the first quarter, according to Bureau of Economic Analysis data published on Friday.

Growth in the sunbelt battleground states of Arizona, Georgia, and North Carolina remained stronger than the national average. Only Nevada lagged behind the 3% gain in US GDP with a 1.8% increase.

Voters have consistently nominated the economy as their top concern, with Republican former President Donald Trump leading his Democratic rival on the issue in surveys.

Harris, however, has been closing the gap on economic issues in recent polls. A Bloomberg/Morning Consult poll of likely voters in the seven swing states this week found that she was in a virtual tie with Trump on who voters trust more to handle the cost of everyday goods and held a notable 11-point advantage on who would most help the middle class.

The GDP figures don't capture the most recent months, and state-level data can be volatile.

But a stronger economy in the blue wall states is potentially politically important because Democrats saw them as the key to retaining the White House even before Harris took over the ticket. The three states as a group have lagged the recovery since the pandemic, growing at just a third the rate of the rest of the US in real per capita terms between 2019 and the end of 2023, according to a Bloomberg analysis published last month.

Wisconsin had the biggest turnaround in the latest GDP data, growing at an annual inflation-adjusted rate of 4.2% in the second quarter after contracting at a 1.1% rate in the first three months of the year. Real GDP rose 4.2% in Michigan and 3.2% in Pennsylvania.

"The key state is Pennsylvania, of course," said Mark Zandi, chief economist at Moody's Analytics, who's based in the state. "The big cities of Philly and Pittsburgh are benefiting from very strong growth in healthcare, education, and in financial services," while the rest of the state is "hanging tough".

Though it hasn't translated into many new factory jobs, manufacturing as a contributor to GDP has been significant, along with construction, he said.

Arizona, Georgia and North Carolina, where economies boomed during the pandemic recovery, outperformed the rest of the US last quarter. In Nevada, however, economic growth in the second quarter was dragged down the key accommodation and food services sector.

The economy remains by far the single most important issue to voters in the Blomberg/Monrning Consult poll, and more than two thirds of respondents think it is going off on the wrong track. Trump continues to lead Harris among likely voters when asked who they trust more to handle the economy. But the vice president has been chipping away at his advantage.

The reality for many people remains that even though the inflation rate has slowed, prices for everything from housing to groceries remain elevated compared to before the pandemic.

Economist Mark Vitner, founder of the North Carolina-based Piedmont Crescent Capital, said swing states like Georgia and North Carolina have clearly benefited from the Biden administration's push for new investment in electric-vehicle and other green energy manufacturing plants.

Vitner cautioned, however, that state-level GDP data is often subject to big revisions. Strong growth figures in any given state often don't translate into votes, even in an election year, he added.

"People don't put GDP in their gas tank. They don't buy GDP at the grocery store. And that's where most of the angst is in the economy," Vitner said. "Someone who is working in an EV plant in Greensboro, North Carolina, is just as frustrated with higher gas prices than if they were working in a furniture factory."

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