The U.S. economy grew faster in the 3rd quarter than previously expected, although the numbers look more gloomy when looked at from the income side, and, since then, economic data suggests that momentum has waned and growth is cooling.
The 5.2 percent pace of expansion was the fastest since the fourth quarter of 2021, with the acceleration in third-quarter GDP mostly because of an uptick in consumer spending and private inventory investment.
The upward revision was mostly due to positive adjustments to nonresidential fixed investment and state and local government spending, both of which were partly offset by a downward revision to consumer spending, according to BEA.
In the second quarter, the U.S. economy grew at a 2.1 percent pace.
Some experts say that the latest GDP was mixed and likely exaggerated the health of the economy in the third quarter. That’s partly because, when measured from the income side (real gross domestic income rose by just 1.5 percent), the U.S. economy grew at just a moderate pace.
“The discrepancy between GDP and GDI is ongoing and massive. That should bear attention.”
Some argued that the latest economic growth data suggests that the U.S. economy managed to pull off a quarter of relatively solid growth amid persistent concern about recession.
“No sign of darkening skies for the economy in today’s report, but growth is cooling,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “There’s simply not as much wind in the economy’s sails in the final quarter this year.”
“Don’t Believe the Hype,” she wrote. “Widest gap between GDI and GDP in history.”
In his analysis, Mr. Shedlock said that “the key takeaway from this release is the economy likely is not humming the way media and [President Joe] Biden present.”
Inflation Fears RevivedAmerican consumers have grown more pessimistic as inflation concerns surged to a 22-year high, flashing a warning sign for the U.S. economy.
The drop marks the fourth consecutive month of declines in the sentiment measure, with the deepening confidence slump coming as the twin geopolitical crises in Ukraine and Gaza show no sign of ending anytime soon.
Meanwhile, inflation expectations jumped for both the near and long term, reflecting consumer fears that the recent easing of price pressures would be short-lived.
U.S. consumers expect inflation to average 4.5 percent over the next 12 months and 3.2 in the next five years, according to the University of Michigan survey. That’s up from the 4.2 percent and 3 percent, respectively, that consumers predicted when asked in October.
In particular, the five-year inflation expectation reading is the highest in 22 years.
“Consumers appear worried that the softening of inflation could reverse in the months and years ahead,” Joanne Hsu, University of Michigan Surveys of Consumers director, said in a statement.
The jump in inflation expectations comes despite the fact that the consumer price index (CPI), a measure of inflation, fell to 3.2 percent in October from 3.7 percent in September.
Wages Not Keeping Up With InflationAmong employed Americans, 60 percent said their incomes haven’t kept up with increases in household expenses due to inflation over the past 12 months, according to a new survey from Bankrate. That’s up from 55 percent last year.
Meanwhile, less than one-third (29 percent) said their pay has kept up with or exceeded inflation this year compared to 33 percent last year, and 11 percent say they don’t know.
Nearly two-thirds of workers saw an increase in pay over the past 12 months (64 percent), including 38 percent who got a pay raise, 16 percent who got a better-paying job, and 10 percent who got both.
Among those who received a raise in the past year, 36 percent said their pay is keeping up with inflation (down from 39 percent last year), compared to 53 percent who said it isn’t (up from 50 percent last year).
“The job market has lost some of its steam since the Federal Reserve began raising interest rates to quell inflation, but not much,” Bankrate analyst Sarah Foster told The Epoch Times in an emailed statement.
“The share of workers who got a raise in the past year is matching last year’s historic levels, and more Americans are getting raises today than they were before the pandemic. Even so, inflation remains painfully high for many households, eroding those gains.
“High inflation feels a bit like taking a pay cut in itself, and it might be one reason why Americans suggest the economy isn’t as strong as it looks on paper.”