The U.S. economy rebounded during Q3 but also showed some signs of tapering. Here are the five things we learned from U.S. economic data released during the week ending October 30.
A significant (but far from complete) bounce back for the U.S. economy during the summer. The Bureau of Economic Analysis’ first estimate of third-quarter 2020 Gross Domestic Product has the U.S. economy surging 33.1 percent on a seasonally adjusted annualized basis. The biggest ever single-quarter percentage increase in economic activity followed the largest ever contraction ever during Q2 (-31.4 percent annualized) and a 5.0 percent drop during Q1. Even with the rebound, economic activity remained 4.0 percent below that of the final quarter of 2019 (the most recent peak for the U.S. economy) and 2.9 percent of that a year earlier. Contributing to Q3’s GDP rise were (in descending order): personal spending (adding 25.3 percentage points to GDP growth), the change in private inventories (+662-basis points), exports (+490-basis points), nonresidential fixed investment (+288-basis points), and residential fixed investment (+209-basis points). Dragging on the economy were imports (costing 309-basis points to GDP growth), federal government spending (-39-basis points), and state/local government expenditures (-30-basis points). The BEA will revise their Q3 GDP estimates twice over the next two months.
Economic growth slowed in September. The Chicago Fed National Activity Index (CFNAI), a weighted index of 85 economic indicators, fell by 84-basis points to +0.27. The three-month moving average of +1.33 was down 189-basis points from August. (A reading of 0.00 indicates the U.S. economy is expanding at its historical average.) Fifty of the 85 indicators made positive contributions to the CFNAI, with 40 improving from their August readings. Three of four major categories of indicators made positive contributions: employment (+0.35, down from +0.71 in August), personal consumption/housing (+0.09 vs. a neutral reading in August), and sales/orders/inventories (+0.07, off 3-basis points from August). Production-related indicators had a negative contribution of -0.24, down from the positive +0.31 reading during the prior month.
Personal spending surged again in September. The Bureau of Economic Analysis reports that real personal consumption expenditures (PCE) jumped a seasonally adjusted 1.2 percent during the month, up from the 0.7 percent increase in August. Spending on goods rose 2.2 percent, split between gains for durable and nondurable goods of 2.9 percent and 1.7 percent, respectively. Services expenditures advanced 0.8 percent. Without adjustments for inflation, nominal PCE increased 1.4 percent, funded 0.9 percent rises of both nominal personal income and disposable income. Real disposable income swelled 0.7 percent. The savings rate shed a half percentage point to a still very high +14.3 percent.
A mixed sentiment picture in October. The Conference Board’s Consumer Confidence Index slipped 4/10ths of a point to a seasonally adjusted reading of 100.9 (1985=100). The current conditions index rose by 5.7 points to 104.6 while the expectations index fell by 4.5 points to 98.4. A mere 17.5 percent of survey respondents saw current economic conditions as “good” versus 33.9 percent viewing them as “poor.” 26.5 percent of Americans perceive jobs as “plentiful” while 19.9 percent see them as “hard to get.” The press release said, “[t]here is little to suggest that consumers foresee the economy gaining momentum in the final months of 2020, especially with COVID-19 cases on the rise and unemployment still high.”
The University of Michigan’s Index of Consumer Sentiment added 1.4 points to a seasonally adjusted reading of 81.8. While at a pandemic high, the measure was below its year-ago mark of 95.5. The current conditions index lost 1.9 points to 85.9 (October 2019: 113.2), while the expectations index gained 3.6 points to a reading of 79.2 (October 2019: 84.2). The press release warned that “the impact of the Covid virus and the extremes of hyper-partisanship will continue long past next week’s election, with the potential to permanently alter the economic and political landscape.”
Durable goods orders expanded for a fifth straight month in September. The Census Bureau estimates new orders for manufactured durable goods jumped 1.9 percent during the month to a seasonally adjusted $237.1 billion. New orders for transportation goods rose 4.1 percent, boosted by a 1.5 percent gain in motor vehicle orders (aircraft were virtually nil). Net of transportation goods, core durable goods orders increased 0.8 percent. Rising were orders for primary metals (+4.0 percent), communications equipment (+1.4 percent), fabricated metal products (+1.2 percent), computers/electronics (+0.6 percent). Orders fell for electrical equipment/appliances (-2.0 percent) and machinery (-0.3 percent). A bright spot was the proxy for business investment—civilian nonaircraft capital goods orders—that had gained 1.0 percent in September.
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending October 24, First-Time Claims, seasonally adjusted): 751,000 (-40,000 vs. the previous week, +534,000 vs. the same week a year earlier). 4-week moving average: 787,750 (+266.4% vs. the same week a year earlier).
- New Home Sales (September 2020, Single-Family Homes, seasonally adjusted annualized rate): 959,000 (-3.5% vs. August 2020, +32.1% vs. September 2019).
- Pending Home Sales (September 2020, Index (2001=100), seasonally adjusted): 130.0 (-2.2% vs. August 2020, +20.5% vs. September 2019).
- FHFA House Price Index (August 2020, Purchase-Only Index, seasonally adjusted): +1.5% vs. July 2020, +8.0% vs. August 2019.
- Case-Shiller Home Price Index (August 2020, 20-City Index, seasonally adjusted): +0.5% vs. July 2020, +5.2% vs. August 2019.
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What We Learned About the U.S. Economy Last Week 