GDP - United States - September 2024
Paul Young
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The initial estimate of third quarter U.S. real GDP growth came in at a near consensus 2.8% annualized pace, just a touch below the consensus forecast and the second quarter’s 3.0% annualized rate. A larger than forecast surge in imports (+11.2%) and slowdown in business inventory gains were the largest contributors to the modest slowdown from the second quarter pace. Imports alone subtracted 1.49 ppts from GDP growth in the third quarter as retailers and wholesalers front-loaded Christmas orders to try to avoid any East Coast port strike supply disruptions. Overall, there wasn’t much not to like in today’s GDP report. As expected, we saw big support from all the major domestic spending categories, including consumer spending, business investment, and government. Final sales to domestic purchasers increased at a stunning 3.5% annualized pace in the third quarter, a notable step up from the second quarter’s 2.8% increase, suggesting that the U.S. economic expansion continues to operate on nearly all cylinders.
Real consumer spending growth was robust in all categories last quarter, coming in at a “hot” 3.7% annualized pace, in-line with our forecast, and a large improvement from the second quarter’s 2.8% gain. Durable goods spending jumped 8.1%, non-durable goods increased 4.9%, and services increased a respectable 2.6%. Business equipment spending growth also strengthened from the second quarter pace, increasing 11.1% and more than offsetting a nearly flat intellectual property gain of 0.6% and single-digit declines in structures (-4.0%) and residential investment (-5.1%). Government spending was probably the biggest upside surprise in today’s report, coming in at a smoking 5.0% annualized growth rate and adding 0.85 ppts to third quarter GDP growth. Federal spending increased 9.7% as national defense spending jumped 14.9%, and state and local spending gained 2.3%.
There was also more good news on inflation, which continues to trend lower with the GDP price index slowing to a 1.8% annualized rate in the third quarter from 2.5% in the second quarter. PCE inflation slipped to 1.5% from 2.5%, while the closely watched core PCE measure dipped to 2.2% from the second quarter's 2.8%. These inflation declines were very close to expectations and shouldn’t be a barrier for the Fed to gradually cut rates in November.
Bottom Line: This makes two consecutive quarters now of well-above potential GDP growth for the U.S. economy, built on a solid foundation of accelerating real consumer spending and government spending growth, and steady non-residential fixed investment. Volatile quarterly trade flows and inventory changes will largely be ignored by the Federal Reserve. Combined with this morning’s better than expected ADP employment report for October, the strength of this GDP report places additional upside risk on our consumer spending and GDP growth forecast for the fourth quarter. The Fed will need to continue to emphasize a more gradual pace of rate cuts from here, if it doesn’t want to ignite a growth and inflation scare down the road, especially if fiscal policy is set to loosen in 2025.
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Source - 满地可银行
Trump Era
?GDP: The country’s economic output grew strongly under both Biden and Trump, with real gross domestic product, which tracks the inflation-adjusted value of all goods and services produced by the U.S., expanding at an annualized rate of 2.7% during Trump’s first three years and 3.5% during Biden’s. The Trump economy’s annualized growth rate of 1.4% over his full term is weaker, though that includes 2020’s COVID-19 shock, while Biden-led growth is concentrated in 2021 at 5.9%, slowing to 1.9% and 2.5% in 2022 and 2023.
Stock market: Stocks performed better under Trump, though both presidencies coincided with stronger-than-average gains—the S&P 500 index has posted an annualized return of 11.8% since Biden took office in 2021, compared to 16.3% under Trump (and there most certainly hasn’t been the stock market crash under Biden that his opponent forecasted in the 2020 race).
Inflation: Inflation has been far worse during the Biden administration, up 19% over the first 42 months of Biden’s term compared to 6% during Trump’s first 42 months, according to the government’s consumer price index. Year-over-year inflation peaked under Biden at a four-decade high of 9% in 2022 before falling to just over 3%—which Biden has blamed on COVID-19’s lingering impact and the Russia-Ukraine war.
Job market: Both Biden and Trump oversaw strong labor markets. Since Biden took office, overall employment is up 11%, average pay is up 18% and unemployment is down from 6.7% to 4.2%. It was particularly a sign of strength that job growth and sub-4% unemployment have coincided with interest rate increases and a subsiding in inflation, both of which typically hurt the labor market, though the U.S. employment picture has shown some cracks in recent months. Perhaps Trump’s most impressive labor market feats were unemployment declining from 4.7% to as low as 3.5% in late 2019 and early 2020, which tied its lowest level since 1969 and wages growing by an inflation-beating 15% over his four-year term.
The COVID jobs asterisk: Much of the Biden labor market gains are part of the post-pandemic recovery, as unemployment was just 3.5% in Feb. 2020 and the number of employed Americans is up only 4%. Biden has largely focused on the Covid-skewed data points, and Trump’s labor market performance depends strictly on the cutoff date, as the COVID-19 disruption undid much of the nominal progress, sending unemployment briefly to an all-time high of 14.9% in April 2020 and causing the overall workforce to actually shrink from Dec. 2016 to Dec. 2020.
Consumer health: Consumer sentiment was lower last month than it ever was under Trump, according to the University of Michigan’s widely tracked survey, as Americans continue to feel the aftershocks of inflation despite strong headline economic growth numbers and a record stock market. July’s 2.9% personal savings rate, which measures the percentage of Americans’ income left over after expenses and taxes, was less than half of April 2019’s 6.8%. The savings rate never fell below 5% under Trump.
Gas prices: The average cost of a gallon of gasoline dipped from $2.37 to $2.28 from Dec. 2016 to 2020, rising to $3.24 by Monday, according to the Energy Information Administration—but gas prices rose to an all-time high of over $5 per gallon in 2022 shortly after Russia’s invasion of Ukraine caused energy prices globally to spike, as the U.S. and its allies vowed to not buy oil from Russia, the world’s third-largest oil producer.
Federal debt: The federal government’s national debt of $35.3 trillion is more than 25% higher than the day Biden took office, after rising 39% during Trump’s presidency, up from $19.95 trillion in Jan. 2017—with the U.S. running a total deficit of $5.85 trillion from its 2021 to 2023 fiscal years, compared to $2.43 trillion from 2017 to 2019 and a record $3.13 trillion in 2020 alone.
Paul is a former IBM Customer Success Manager who has deployed over 300 data and AI solutions across industries and geographies for the past 8 years. Paul is a Financial Planning, Analysis, and Reporting SME working with data including integration of macro and micro indicators as part of the integrated business planning and reporting cycle.
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