The U.S. economy expanded at a solid 2.8% annual pace from July to September, driven largely by consumer spending despite the ongoing challenge of high interest rates. Wednesday's report from the Commerce Department indicated a slight slowdown in gross domestic product (GDP) -- the total output of goods and services -- from a 3% growth rate in the April-June quarter. However, the latest numbers still showcase the economy's unexpected resilience as Americans evaluate economic conditions in the final phase of the presidential race.
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#2 | Posted by redlightrobot at 2024-10-30 03:24 PM
So, by lumping "consumer spending" with "private investment" you have the GDP.
No.
Those two contributors should be quantified independently, because dividend re-investments and stock buybacks should not be considered "consumer spending".
What?? No, they are just two components of the official and most popular formula for the GDP and GNP. "Consumer spending" recently accounted for about 70% of GDP.
I'm probably misunderstanding this entire scenario.
Yes.
#5 | Posted by AMERICANUNITY at 2024-10-31 03:12 PM
The Consumer Price Index has dropped to a 2.1% inflation rate.
Headline CPI ** did, purely on the [relative] weakness of oil price, thanks to IAF and USAF finally dealing with Houthis (Iranian proxy in Yemen) and their campaign to block Red Sea shipping routes, and after Israel announced that they will not hit Iranian oil industry (in the first strike) and US oil industry (Exxon, Chevron et al) and OPEC dialed up the oil output.
Core CPI (excludes "volatile" food and energy prices) for September was higher again and August revised up.
And Sept. PCE (Fed's preferred inflation measure) core and headline was up again, and also has been rising, which is why T-bonds yields are rising, despite further weakness in the economy - (Sept. Chicago PMI plunged to 41.6 from already low 46.6, expected 47.5) and retail inventories have increased while wholesalers and distributors are reduced, i.e., slowing sale-through. September personal spending (0.5% vs exp. 0.4%) continues to outpace personal income (0.3% vs exp. 0.4%), with consumer debt, not even counting BNPL, increasing (meaning more people are having hard time making ends meet) and more of upper and middle class consumers are "trading down" - i.e., are on downward "hedonic adaptation/treadmill." ***
The U.S. economy is the envy of the world. We've come out of the pandemic in better shape than any developed country in the world.
Almost always is, in "good" and "bad" times, regardless of US president - has to do with the US more resilient, entrepreneurial and technologically empowered productive private sector (while productivity has actually declined recently in both US and, even more so, in EU-10) and being comparatively "undertaxed" (if you don't count state and local income and sales taxes) than other "developed" / European / EU-10 economies.
ecipe.org - For decades, the EU's productivity growth has consistently lagged the US
BTW, our stock market is up 51% compared to the 44% Trump loved to brag about. Our unemployment rate is much less than Europe's. Thank you President Biden.
US Presidents have very little influence on the stock market.
BTW, outside of Trillions of dollars in deficit spending ($1.9T in fiscal 2024 alone) and consequent inflation, what did President Biden (and Trump before him, not to mention Congress critters) do to "generate" this kind of return?
Or is this just an "AI-mania Bubble" that started when OpenAI introduced ChatGPT in November 2022, after the "Everything Bubble" (from COVID "stimulus" spending and Fed's QE) deflated back to below 2020 level?
"Magnificent Seven" are all involved or invested in "AI" and are currently valued at 33% of "cap-weighted" S&P 500 - that's about what the ratio of XLF (financial sector) to SPX cap was before GFC and 2007-2008 meltdown - that should be a reason to be concerned, not attribute to some "magical" presidential powers.
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** BLS explains: "The CPI does not necessarily measure your own experience with price change... A national average reflects millions of individual price experiences; it seldom mirrors a particular consumer's experience."
"Average" is a key word here, but it's actually even worse: some of the components are "weighted" higher, some lower; others, like consumer's credit interest payments, some property-related expenses, some insurance costs are not included, use of subjective "hedonic regression" etc.
Also, depending what "weighted basket" of goods and services you are in, your "personal inflation" ("particular consumer experience") may be higher than headline or core CPI.
Neither BLS CPI nor Fed's PCE are perfect at measuring even "average" inflation:
The pricing challenges aren't unique to the CPI. ... The personal consumption expenditures price index, produced by the Bureau of Economic Analysis, also has some quirks when it comes to measuring certain expenses like health care.
So neither the CPI or CPE are ideal, one-univariate-fits-all indices, and both understate inflation. That's one reason why Social Security checks (and/or other "fixed income") even "adjusted for inflation" usually fail to keep up with the actual COL.
*** www.pbs.org - Driving retail spending, wealthier Americans are powering US economy - PBS/AP, Oct 18, 2024
www.bloomberg.com - The Mighty American Consumer Is Powered by Higher Earners - Oct 15, 2024
|------- By many measures, Americans appear to be tapped out: Credit-card delinquency rates are on the rise, millions are falling behind on student-loan payments and the explosion of "buy now, pay later" apps suggests shoppers are racking up billions of dollars in "phantom debt" that can't easily be tracked by economists.
A new study by the Federal Reserve puts data behind that K-shaped spending theory, showing that the recent strength in spending has been driven by middle- and high-income families.
Among key findings:
* - In the two years before Covid, growth in average retail spending was roughly the same across income brackets
* - In the two years following the pandemic, low-income families boosted consumption much faster, helped by government stimulus programs
* - In the past two years, higher-earning households were the main drivers. The Fed researchers speculate it may be because they are enjoying a wealth effect from soaring stocks and home values as well as higher interest and investment income
Wells Fargo economists argued in a recent note that lower rates may not provide much lift for consumer spending. At the macro level, they say, the lost interest income will likely be larger than the savings from households who will be spending less to finance their debt.
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