By Peter Rupert
GDP and Components
The BEA announced that Q3 real GDP increased 2.02%, falling below many forecasts that were in the 3.0-3.5% range. The decline most likely reflected the Delta variant, supply chain issues and new inflation fears. Have you tried to buy a car lately? Weakness in personal consumption expenditures (PCE) played a big role in the weakness, increasing only 1.58%. Durable good consumption has been exceptionally wacky, falling 26.2%. The volatility in durable goods consumption has increased substantially throughout the pandemic, here are the numbers: Q3, 2020= 89.0%; Q4, 2020=1.1%; Q1, 2021=50.0%; Q2, 2021=11.6% and now -26.2%.
Although real investment saw a spike up by 11.7%, both residential and non-residential structures took a big hit, down 7.7% and 7.3%, respectively.
Personal Income and Outlays
The BEA delivered some additional bad news, personal income declined 1.04% in September following a 0.2% rise in August. Real disposable personal income sank by 1.6% and the personal savings rate fell sharply to 7.5%. Further complicating the forecast, the PCE price index climbed to 4.38% and will likely be a major topic in the upcoming FOMC meeting in the coming week.
Unemployment Claims
On the better news front, initial unemployment claims dropped again, now at 281,000, the lowest since the pandemic started. The same for continued claims, falling to 2,243,000.
Although many stats show the labor market looking a bit more “normal” there appears to be ongoing difficulties in finding suitable workers. This mismatch is evident as there are now about 2 million more people unemployed than the number of job vacancies. This will also be a discussion by the FOMC in relation to supply chain issues. All of this makes for a pretty spooky Halloween. Stay safe.
