Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
S&P 500 – Is a 5% Correction Enough? - 6th Dec 21
Global Stock Markets It’s Do-Or-Die Time - 6th Dec 21
Hawks Triumph, Doves Lose, Gold Bulls Cry! - 6th Dec 21
How Stock Investors Can Cash in on President Biden’s new Climate Plan - 6th Dec 21
The Lithium Tech That Could Send The EV Boom Into Overdrive - 6th Dec 21
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
GOLD HAS LOTS OF POTENTIAL DOWNSIDE - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Real GDP Momentum Pickup Buys Time Before Fed Acts Again

Economics / US Economy Oct 28, 2011 - 05:25 AM GMT

By: Asha_Bangalore

Economics

Best Financial Markets Analysis ArticleReal gross domestic product (GDP) of the U.S. economy grew at an annual rate of 2.5% in the third quarter after registering an abysmally slow performance in the first-half of the year (+0.9%). The headline and details of the third quarter GDP report are both encouraging given that considerations of a double dip surfaced in recent weeks.



The level of real GDP in the third quarter now surpasses the peak reached in the fourth quarter of 2007 (see Chart 2), which allows us to note that the U.S. economy has entered a phase of expansion in the current business cycle. Real GDP estimates of earlier quarters had reached this mark only to be revised away. Final sales, which exclude inventories, posted a robust increase of 3.6% in the third quarter after 1.6% gain in the second quarter.

Consumer spending advanced at a significant pace in the third quarter (+2.4% vs. +0.7% in 2011:Q2). Among the three components of consumer spending, durable goods (+4.1%) and services (+3.0%) posted strong gains, while expenditures on non-durables were nearly steady. The worrisome part is that the increase in consumer spending in the third quarter was accompanied by a drop in real disposable income (Chart 3) and the saving rate (Chart 4). The obvious conclusion is that the consumers spent more than their income in third quarter. Will the upward trend of saving snap back in the near term? The best guess is that soft employment and income growth suggests that a conservative consumer will prevail in the months ahead.

Business spending grew at a rapid clip in the third quarter, both structures (+13.3%) and equipment and software spending (+17.4%) show noticeable growth. These numbers run counter to claims that uncertain economic conditions are holding back business spending. Exports of goods and services grew at an annual rate of 4.0% in the third quarter, slightly higher than the pace seen in the prior quarter.


The big surprise in today’s report was the large drop in inventories during the third quarter ($5.4 billion vs. $39.1 billion in the second quarter). Businesses are likely to add to their stockpiles in the near term and account for a large increase in headline GDP, but the timing of this event is unclear, for now. Inflation numbers point to a moderation in the third quarter. The personal consumption expenditure price index rose 2.4% in the third quarter vs. a 3.3% jump in the second quarter. Likewise, the core personal consumption expenditure price index, which excludes food and energy, advanced 2.1% in the three months ended September vs. a 2.3% increase in the previous three-month period. The moderation in inflation data works in favor of the doves in the FOMC and supports their case for additional monetary policy action.


The FOMC meeting of November 1-2 is likely to end without changes in Fed policy, following unconventional announcements after the August and September meetings. Incoming economic data present a mixed picture, which allows the FOMC time to confirm that additional support may be necessary to bolster economic activity before taking action at the December or January meetings. In the past week, several Fed officials, have been presenting arguments that make a case for a third round of quantitative easing (QE3). The elevated unemployment rate is at the top of their list of concerns. Although details of the resolution of the debt crisis in Europe are not available as of this writing, a compromise has been reached regarding the Greek debt problem and further strengthening of the European Financial Stability Fund is in the offing. The bottom line is that headwinds from Europe seen to be large and detrimental a few days ago may not occur implying that downside risks to U.S. economic growth in the near term have been reduced.


Asha Bangalore — Senior Vice President and Economist

http://www.northerntrust.com

Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.

Copyright © 2011 Asha Bangalore

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in