The Bureau of Economic Analysis reported that the U.S. economy grew by an annualized 3.0 percent in the third quarter, extending the 3.1 percent gain in the second quarter. This was slightly better than the predicted growth rate of 2.6 percent—a sign that even with the recent hurricanes, the U.S. economy continues to expand at a decent clip. Strength in consumer and business spending, including inventories, and net exports boosted the third-quarter data. For 2017 as a whole, I am predicting real GDP growth of 2.3 percent, with 3.0 percent growth for the current fourth quarter. This is a slight improvement from the 2.1 percent average growth rate since the Great Recession, but I am also estimating 2.6 percent growth for 2018. In addition, I continue to believe there is upward potential in the forecast, especially for next year and beyond, if pro-growth policies are enacted. Read More
Retail spending rebounded strongly, up 1.6 percent in September after edging down by 0.1 percent in August. The decline in August and the corresponding uptick in September were both influenced by recent hurricanes, and in the latest figures, this can be seen in robust spending growth at motor vehicle and parts dealers (up 3.6 percent) and building material and garden supply (up 2.1 percent) stores as Americans in the affected areas replaced and repaired their damaged homes and automobiles in mass. In addition, gasoline prices have moved higher, pushing retail sales at gasoline stations up 5.8 percent in September. Illustrating this point, the Energy Information Administration reports that the average price of regular gasoline rose from $2.399 per gallon on the week of August 28 to $2.583 on September 25.
In general, consumer spending remains a bright spot in the economy, with Americans more willing to open their pocketbooks this year than last, especially than in the beginning months of 2016. Over the past 12 months, spending has risen by 4.4 percent, up from 3.5 percent in the prior release. This has drifted higher over the past three months, up from 3.0 percent in June. Excluding motor vehicles, retail sales increased 4.6 percent year-over-year in September, up from 2.4 percent in June and 4.1 percent in August. Read More
The Bureau of Economic Analysis reported that personal spending increased 0.1 percent in August, slowing from a gain of 0.3 percent in July. Nondurable goods spending rose 0.3 percent for the month, but that was offset by a 1.1 percent decline in durable goods, especially for motor vehicles. Despite the mixed results in the latest data, Americans have continued to spend at relatively healthy rates overall. Indeed, personal spending has increased 3.9 percent over the past 12 months. Breaking that figure down, spending on durable and nondurable goods has risen 3.5 percent and 3.1 percent year-over-year, respectively. For its part, the saving rate was unchanged at 3.6 percent in August, and it continued to indicate accelerated spending, down from a saving rate of 4.9 percent one year ago. Read More
The second revision to real GDP growth for the second quarter changed slightly from its last estimate. The Bureau of Economic Analysis upped its estimate of growth in the U.S. economy in the second quarter from 3.0 percent to 3.1 percent. While there were small tweaks in a few areas, the higher figure mainly corresponded with slightly better spending on inventories.
I continue to anticipate 2.2 percent growth for 2017 as a whole. However, Hurricanes Harvey, Irma and Maria will impact forecasts for the third and fourth quarters. I expect 2.3 percent growth in the third quarter, with weather reducing overall output by at least 0.5 percent in the current quarter. However, fourth-quarter growth will be better than predicted originally as the tremendous damage is repaired in Florida, Texas and the Caribbean. I estimate 3.0 percent growth in the fourth quarter—at least for now.
Retail spending was down 0.2 percent in August, according to the Census Bureau, and it is likely that Hurricane Harvey might have negatively impacted those figures. Weather aside, retail sales have continued to increase modestly overall, helping to provide a boost to the U.S. economy. Along those lines, Americans had been more willing to open their pocketbooks more this year than last, especially than in the beginning months of 2016. Over the past 12 months, spending has risen by 3.2 percent. Still, there has been a bit more caution on the part of the American consumer in the past few months than we might have expected. The year-over-year rate has drifted lower since peaking at 5.6 percent in January, for instance. Excluding motor vehicles, retail sales increased 3.6 percent year-over-year in August, up from 2.4 percent in June but down from 5.4 percent in January. Read More
The Bureau of Economic Analysis reported that the U.S. economy grew an annualized 1.4 percent in the first quarter in newly revised figures, up from 1.2 percent in its prior estimate. The increase stemmed largely from better consumer spending and export data in this revision. Personal consumption expenditures rose 1.1 percent at the annual rate in the first quarter, which was an improvement from the prior estimate of 0.6 percent but still weaker than desired. Durable goods spending declined 1.6 percent in this report, pulled lower by a sharp decrease in motor vehicles and parts. Nonetheless, consumer spending added 0.75 percentage points to headline GDP growth, up from 0.44 percent in the estimate released last month.
At the same time, goods exports increased 10.5 percent at the annual rate, an improvement from the 8.4 percent gain in the prior report. In addition, the decline in goods imports shifted from 4.5 percent to 4.4 percent in this release. As a result, the contribution to GDP growth from net exports rose from 0.13 percent in the earlier estimate to 0.23 percent. After a large drag on growth in the fourth quarter of 2016 from net exports, this was a sign that international activity had stabilized somewhat in the early months of 2017.
The U.S. consumer appears to be more cautious than we would expect, with disappointing retail sales figures in May, according to the Census Bureau. Spending at retailers fell 0.3 percent in May, nearly reversing the 0.4 percent gain in April and well below consensus estimates. Americans had been more willing to open their pocketbooks, especially relative to the caution seen at the beginning of 2016. This culminated in 5.6 percent year-over-year growth in January, its fastest pace since March 2012, but the year-over-year rate has eased since then. Since May 2016, retail spending has increased 3.8 percent. To be fair, sales continue to rise modestly, and year-over-year growth has trended mostly higher, up from 2.3 percent at this point last year.
Looking at the May report, the data were mixed but mostly lower. Retail segments with the largest declines in monthly sales included electronics and appliance stores (down 2.8 percent), gasoline stations (down 2.4 percent), miscellaneous store retailers (down 1.3 percent), department stores (down 1.0 percent) and sporting goods and hobby stores (down 0.6 percent), among others. While nonstore retailers (up 0.8 percent), furniture and home furnishings stores (up 0.4 percent), clothing and accessory stores (up 0.3 percent) and food and beverage stores (up 0.1 percent) saw increases in May, each experienced reduced sales compared to April. It is worth noting the contrast between nonstore retailers and department stores in this report, as retailers continue to grapple with the structural shifts taking place between online and brick-and-mortar spending habits.
The Bureau of Economic Analysis reported that the U.S. economy grew 1.2 percent in the first quarter in newly revised figures. This improved slightly from the earlier estimate of 0.7 percent growth, but nonetheless, it continued to represent a slow start to the year. The upward revision stemmed mainly from improved data on consumer and business spending, even as the drag from inventory spending was somewhat larger.
To be fair, we traditionally have a sluggish first quarter followed by a strong rebound in the second quarter. My current forecast is for at least 3.0 percent growth in real GDP in the second quarter, with the economy expanding 2.2 percent for 2017 as a whole. Of course, these estimates might drift higher with passage of more pro-growth policies, especially in terms of the outlook later this year and into 2018.
The Census Bureau said that retail sales picked up in April after slowing in February and March. Spending in the retail sector increased 0.4 percent in April, and sales in March were revised higher, up 0.1 percent instead of falling by 0.2 percent in the original estimate. After falling for three consecutive months, motor vehicle and parts sales rebounded in April, up 0.7 percent. Excluding autos, retail sales increased by 0.3 percent for the month. In general, Americans have been more willing to open his/her pocketbook this year than at this time last year; yet, consumers have been more cautious through the first four months of 2017 than we might prefer. Along those lines, retail spending has risen 4.5 percent over the past 12 months. While that represents relatively strong growth in consumer sales year-over-year, it has edged lower since measuring 5.9 percent in January. For comparison purposes, the year-over-year rate for retail sales was 2.8 percent in April 2016. Read More