There were a few important reports on the U.S. economy released this morning. First, data from the Bureau of Economic Analysis (BEA) showed that U.S. gross domestic product (GDP) growth accelerated in the third quarter of 2016 by more than previously estimated. Specifically, real GDP, which measures the value of the production of goods and services in America adjusted for price changes (inflation), increased at an annual rate of 3.2 percent in Q3. That was up from the second quarter’s 1.4 percent pace of expansion and the first growth reading above 3 percent since 2014. The significant upward revision was due to stronger personal consumption expenditures (consumer spending) that more than offset weaker business investment. Inventory investment was also revised lower, which suggests that U.S. businesses were sitting on smaller piles of unwanted goods. Another highlight from the report is that real gross domestic income (GDI) increased 5.2 percent in the third quarter, a big jump from 0.7 percent in Q2 and the fastest pace of growth in more than two years. The large GDI gain was driven by a rebound in corporate profits and rising household incomes. Looking ahead, incoming data on housing, retail sales, and manufacturing suggest that the economy retained its momentum in at least the early part of the fourth quarter even as the strong U.S. dollar continues to weigh on exports.
Elsewhere, the consumer confidence index from The Conference Board surged to 107.1 in November, a significant rebound from the 3-month low hit in October to what is the highest headline reading since July 2007 (pre-recession). The sharp increase may have been helped by the results of the Presidential election, especially since confidence fell markedly in the prior month in swing states that all wound up going to Trump. A similar improvement was seen in last week’s release of the University of Michigan’s consumer sentiment index, as well as a new report from Gallup out this morning. Indeed, Gallup’s U.S. economic confidence index spiked to +6.0 in the week ending November 27th, a significant turnaround from -11.0 in the week before the Presidential election and a new all-time high for this sentiment indicator. Lynn Franco, Director of Economic Indicators at The Conference Board, added that “with the holiday season upon us, a more confident consumer should be welcome news for retailers.”
Sources: Econoday, Bloomberg, Twitter, Zerohedge, U.S. Census Bureau, The Conference Board, Gallup, FRBSLPost author: Charles Couch