September 22, 2023

by confoundedinterest17

Today’s GDP report from the BEA jogs my memory of the Peggy Lee track “Is That All There Is?” Between the huge Fed financial stimulus since late 2008 (and notably since Covid in 2020) and all of the Federal spending (Covid reduction, Inflation discount, Omnipork spending invoice, and so forth.), US actual GDP rose by solely 2.9% in This fall from Q3.

However indicators of slowing underlying demand mounted because the steepest interest-rate hikes in a long time threaten progress this yr.

Gross home product elevated at a 2.9% annualized price in last three months of 2022 after a 3.2% achieve within the third quarter, the Commerce Division’s preliminary estimate confirmed Thursday.

Private consumption, the largest a part of the economic system, climbed at a below-forecast 2.1% tempo (forecast was for two.9%). Once more,

The report additionally confirmed some indicators of stress for American shoppers whose wages have didn’t sustain with inflation and continued to encourage them to attract down financial savings gathered from authorities pandemic-relief applications. The burden of elevated costs and better borrowing prices is mounting, pointing to a tenuous outlook for the economic system.

A key gauge of underlying demand that strips out the commerce and inventories elements — inflation-adjusted last gross sales to home purchasers — rose an annualized 0.8% within the fourth quarter after a 1.5% achieve.

Core PCE progress grew at 3.9%, however is slowing already as M2 Cash progress dies.

Inventory-index futures and Treasury yields remained larger and the greenback was little modified after the GDP report and better-than-expected weekly jobless claims. Functions for unemployment insurance coverage dropped to 186,000 final week, the bottom since April.

Latest knowledge present cracks are creating extra broadly. Retail and motorized vehicle gross sales knowledge confirmed households are beginning to retrench, the housing market continues to weaken and a few companies are reconsidering capital spending plans.

Because the Federal Reserve continues to hike rates of interest to make sure inflation is extinguished, housing and manufacturing have deteriorated rapidly whereas industries together with banking and expertise are finishing up mass layoffs.

The GDP report confirmed the private consumption expenditures value index, a key inflation metric for the Fed, rose at an annualized 3.2% price within the fourth quarter, down from a 4.3% tempo within the prior three months. The core index that excludes meals and power climbed at a 3.9% price in contrast with 4.7% paces within the prior two quarters. Month-to-month knowledge for December will likely be launched Friday.

The moderation in value pressures is per forecasts that the Fed will additional reduce its tightening marketing campaign subsequent week, when it’s anticipated to boost charges by 25 foundation factors. Policymakers boosted the benchmark price by 50 factors in December after 75 basis-point hikes at their earlier 4 conferences.

The world’s largest economic system expanded 2.1% final yr. In 2021, when demand snapped again from pandemic-related shutdowns, the economic system grew 5.9% — the very best efficiency since 1984.

The GDP knowledge confirmed providers spending elevated at 2.6% annualized price within the October-December interval, the slowest since final yr’s first quarter. Outlays on items rose at a 1.1% tempo, the primary advance since 2021.

Enterprise funding slowed sharply after a third-quarter surgeSpending on tools declined an annualized 3.7%, essentially the most for the reason that second quarter of 2020. Outlays for buildings rose at a 0.4% tempo.

Let’s hope the BEA isn’t padding the numbers just like the BLS was caught doing within the first half of 2022.

Lastly, US Actual GDP progress YoY FELL to solely 0.95925% as M2 Cash progress disappears.