Pre-Thanksgiving Economic Data: GDP, Investment and Disposable Income

By at 27 November, 2019, 12:56 pm

by Raymond J. Keating-

Before we turn to watching the Thanksgiving Day Parade and football, and enjoying dinner on Thanksgiving, a few data reports were released on Thanksgiving Eve, November 27.

GDP Revision

First, the second revision on third quarter GDP was published by the U.S. Bureau of Economic Analysis. The growth rate was revised up from 1.9 percent to 2.1 percent (the original estimate was 2.0 percent). Specifically, the 2.1 percent rate was well below the average growth rate of better than 3 percent during the post-WWII era, and the key problems remained on the private investment and trade fronts.

Durable Goods

Second, durable goods report for October showed durable goods orders up slightly (+0.6 percent), compared to a decline of 1.4 percent in September. Over the longer haul, durable goods orders have been on the decline since September 2018.

On the investment front, new orders for capital goods jumped by 5.4 percent in October, after declines of 2.8 percent in September and 0.5 percent in August. And if we focus on nondefense capital goods excluding aircraft orders, which is a gauge of private investment in equipment and software, it grew by 1.2 percent, which came after declines in two months. While nondefense capital goods excluding aircraft orders remained down since July 2018, positive growth in October was welcome, and the hope is that it signals a turnaround in private business investment.

Source: The Federal Reserve Bank of St. Louis, FRED

Personal Income

Finally, the BEA also reported on personal income for the month of October. Unfortunately, personal income growth was flat.

But real per capita personal disposable income (i.e., personal income less personal current taxes, and adjusted for population and inflation) ranks as the most important data in this report given that this is the income from which people save, invest and consume. In October, real per capita disposable income declined. Over the longer run, disposable income has been on a nice, general growth path for more than two years. Hopefully, the decline in October merely rates as a momentary pause in that growth, more a case of data volatility than a reversal into a troubling trend.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.


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