A Bit Slower: October 25 – 29

More data shows the impact of the headwinds afflicting the economy in September. Here are the five things we learned from U.S. economic data released during the week ending October 29. 


Personal spending increased at a slower pace (unlike prices) in September. The Bureau of Economic Analysis reports real personal consumption expenditures (PCE) grew a seasonally adjusted 0.3 percent during the month, half of August’s gain. Real PCE was 6.3 percent ahead of its year-ago rate. Spending on durable goods inched up 1/10th of a percentage point during the month, with durable goods spending falling a half-point and nondurables increasing 0.4 percent. Services expenditures advanced 0.4 percent. Nominal (not price adjusted) PCE rose 0.6 percent even as nominal personal income and disposable income fell 1.0 percent and 1.3 percent, respectively. Real disposable income declined 1.6 percent in September. As a result, the savings dropped to a pandemic-low (but still above average) of +7.5 percent. The same report finds the PCE price index up 0.3 percent, with the core inflation measure (net of energy and food) advancing 0.2 percent. Year-to-year comparables for both remain at pandemic highs of +4.4 percent and +3.6 percent, respectively. 

Economic growth sputtered in Q3. The first estimate of third-quarter 2021 Gross Domestic Product (GDP) has the U.S. economy expanding at a 2.0 percent seasonally adjusted annualized rate (SAAR). This was down sharply from Q2’s 6.7 percent advance and the lowest expansion rate in the current recovery. Only three major GDP components positively contributed to Q3 activity: change in private inventories (making a huge rebound after two quarterly declines), personal consumption (down sharply from more robust gains during the prior two quarters), and local/state government spending. Fixed investment (both residential and nonresidential), exports, imports, and federal government spending dragged down Q3 GDP. The Bureau of Economic Analysis will update its Q3 GDP estimate twice over the next two months. 

…including weakness in September. The Chicago Fed National Activity Index (CFNAI) lost 18-basis points during the month to a reading of -0.13. This was the measure’s worst mark since February and was indicative of economic growth slower than the historical average. Forty-three of the CFNAI’s 85 components made positive contributions to the index. Production-related components were a significant drag, subtracting 37-basis points to the CFNAI.  Making small positive contributions were indicators tied to employment (+0.16), sales/orders/inventories (+0.07), and personal consumption (+0.02).

Durable goods orders—net of airplanes and automobiles—edged up in September. The Census Bureau estimates new orders for manufactured durable goods declined 0.4 percent on a seasonally adjusted basis during the month after rising 1.4 percent in August. Pulling down the headline index were drops in orders for civilian aircraft (-27.9 percent) and motor vehicles (-2.9 percent). Net of transportation goods, core durable goods orders grew 0.4 percent in September (vs. +0.3 percent in August). Rising were orders for machinery (+1.1 percent), fabricated metal products (+0.7 percent), and primary metals (+0.6 percent). Orders for electrical equipment/appliances and computers/electronics declined 0.5 percent and 0.3 percent, respectively. 

Two surveys present diverging views of Americans’ sentiment. In October, the Conference Board’s Consumer Confidence Index added 4.0 points to a seasonally adjusted 113.8 (1985=100). The present conditions index grew 3.1 points to 147.4 while the expectations index jumped 4.6 points to 86.7. A mere 18.6 percent of consumers viewed business conditions as “good,” while 24.9 percent saw them as “bad.” Meanwhile, 55.6 percent of survey respondents said that jobs were “plentiful” versus 10.6 percent indicated that they were “hard to get.” The press release noted that consumers’ concerns about inflation were at a 13-year high, but these fears had a “muted” impact on confidence.

The University of Michigan’s Index of Consumer Sentiment seasonally adjusted reading of 71.7 (1966Q1=100) was off 1.1 points from September and 10.1 points from a year earlier. The current conditions index shed 2.4 points while the expectations measure slipped by 2/10ths of a point to 67.9. The press release notes that “higher rates of inflation and falling confidence in government economic policies.” In terms of the former, one in five survey respondents commented on “[d]eclining living standards due to inflation.”

Other U.S. economic data released over the past week:

  • Jobless Claims (Week ending October 23, 2021, First-Time Claims, seasonally adjusted): 281,000, -10,000 vs. the previous week, -487,000 vs. the same week a year earlier). 4-week moving average: 299,250 (-62.4% vs. the same week a year earlier). 
  • New Home Sales (September 2021, Sales of Single-Family Homes, seasonally adjusted annualized rate): 800,000 (+14.0% vs. August 2021, -17.6% vs. September 2020). 
  • Pending Home Sales (September 2021, Index (2001=100), seasonally adjusted): 116.7 (-2.3% vs. August 2021, -8.0% vs September 2020).
  • Case-Shiller Home Price Index (August 2021, National Index, seasonally adjusted): +1.4% vs. July 2021, +19.8% vs. August 2020).
  • FHFA Housing Price Index (August 2021, Purchase-Only Index, seasonally adjusted): +1.0% vs. July 2021, +18.5% vs. August 2020.
  • Agricultural Prices (September 2021, Price Received by Farmers, not seasonally adjusted): -0.7% vs. August 2021, +22.4% vs. September 2020.

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

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