There were two important reports on the U.S. economy released this morning. First, personal income for Americans rose by 0.2 percent in November, according to new data from the Department of Commerce. That was worse than expected and year-over-year growth fell to the lowest level of 2018. Personal spending, though, which accounts for roughly 70 percent of U.S. gross domestic product (GDP), increased by 0.4 percent last month. That was better than anticipated even after the October gain was revised higher. Since consumption remained elevated despite modest income gains, it should not be too surprising that the report also revealed personal saving declined to a 5-year low last month. Add to that the recent uptick in credit card utilization and it is understandable why many economists have doubts about the sustainability of consumer spending without a faster acceleration in wage gains.
Elsewhere, orders for U.S.-manufactured durable goods (items meant to last at least three years) rose in November by $1.9 billion (0.8 percent) to $250.8 billion, according to a new report from the Census Bureau. That was a smaller rebound than anticipated and year-over-year growth fell to a 5-month low. “Core” durable goods orders, which exclude the volatile transportation component, also disappointed forecasts (-0.3 percent vs. +0.3 percent), and orders for nondefense capital goods excluding aircraft, i.e. core capital expenditures, an important proxy for U.S. business investment, unexpectedly declined for the third time in the past four months. Although far from terrible, the latest durable goods report confirms that this component of the economy has cooled recently, likely in part due to the waning tax cut boost and avoidable trade war. In response to this morning's data, the Federal Reserve Bank of Atlanta lowered its fourth quarter GDP growth forecast to 2.7 percent. That would be a marked slowdown from Q3’s 3.4 percent increase, albeit somewhat consistent with the recent seasonal pattern.
Sources: Econoday, U.S. DoC, Bloomberg, ZH, FRBSL
Post author: Charles Couch