Headline GDP continues to send mixed signals on the direction of the U.S. economy. During Q3, real GDP rose at a 2.6% annualized rate, ending the recent string of quarterly declines in growth registered in the first half of 2022. At first look, the expansion in real GDP is a welcome sign that the economy is busting out of its recent slump. The underlying details, however, paint an entirely different picture. The top-line real GDP figure was boosted by a 2.8 percentage point contribution from real net exports. Real exports of goods and services rose solidly during the quarter. Considering the current strength of the U.S. dollar and the economic struggles of America's trading partners, the strong growth in exports is unlikely to be sustained. On the other hand, real imports pulled back in Q3 as supply chains continue to normalize, businesses slow inventory builds and consumer demand wanes.
Taken together, consumer spending and business fixed investment, which are a better measure of the underlying trend in economic activity, were essentially flat during Q3. A sharp drop in structures spending dragged down overall business fixed investment, which fell 4.9% during the quarter. New nonresidential development continues to be hampered by uncertain demand and rising building material prices. Equipment and intellectual property spending both expanded solidly. The impacts of higher interest rates as well as the return to more typical consumer behavior were evident in the consumer spending data. Real personal consumption expenditures (PCE) registered a relatively soft 1.4% annualized rise. The quarterly gain was mostly the result of a solid increase in services spending, which is still benefiting from unleashed pent-up demand from the pandemic. Spending on goods, which is more sensitive to interest rates, declined for the third straight quarter.
Housing is another sector that is highly responsive to financing costs. Residential fixed investment plummeted 26.4% during Q3, a sharp decline brought on by this year's spike in mortgage rates. Since the start of the year, mortgage rates have moved up rapidly and are currently hovering above 7.0%. The climb in borrowing costs has significantly reduced affordability and pushed buyers to the sidelines. If October's drop in mortgage demand is any indication, residential fixed investment is likely to remain a drag on overall GDP. Mortgage applications for purchase have slipped in every week so far in October and are down almost 42% over the year. Pending home sales and new home sales are also on a steep downward trend, with both retreating markedly in September. Home prices are now declining on a monthly basis. The S&P Case-Schiller National Home Price Index dropped 1.3%, the second straight monthly decline.
This Week's State Of The Economy - What Is Ahead? - 27 November 2019
Wells Fargo Economics & Financial Report / Nov 28, 2019
A series of U.K. general election polls released this week continue to show Boris Johnson’s Conservative Party with a significant lead over the opposition Labor Party.
This Week's State Of The Economy - What Is Ahead? - 23 September 2020
Wells Fargo Economics & Financial Report / Sep 22, 2020
European activity is surging. Germany and Italy are leading the way, but France is close behind despite an ongoing rise in cases. The Google data are a bit outdated, but are hard to reconcile with today’s weak Eurozone services PMI figures.
This Week's State Of The Economy - What Is Ahead? - 05 August 2022
Wells Fargo Economics & Financial Report / Aug 08, 2022
The Bureau of Labor Statistics reported this morning that nonfarm payrolls increased 528,000 for the month of July, easily topping estimates, lowering the unemployment rate to 3.5%.
This Week's State Of The Economy-What Is Ahead?
Wells Fargo Economics & Financial Report / Aug 03, 2019
How will Fed rates-cut and Trump 10% tariff on $300 Billion Chinese Goods countered by Chinese currency devaluation against Dollar, affect inflation and economic slowdown in US economy?
This Week's State Of The Economy - What Is Ahead? - 03 September 2021
Wells Fargo Economics & Financial Report / Sep 10, 2021
e move into the Labor Day weekend celebrating the 235K jobs added in August, while simultaneously lamenting that it was about half a million jobs short of expectations.
This Week's State Of The Economy - What Is Ahead? - 04 November 2022
Wells Fargo Economics & Financial Report / Nov 07, 2022
Employers continued to add jobs at a steady clip in October, demonstrating the labor market remains tight and the FOMC will continue to tighten policy.
November 2020 Economy At A Glance
Wells Fargo Economics & Financial Report / Nov 12, 2020
U.S. gross domestic product (GDP) grew 7.4 percent, or $1.3 trillion in Q3, adjusted for inflation.
September 2020 Economy At A Glance
Wells Fargo Economics & Financial Report / Sep 19, 2020
A March survey by the Federal Reserve Bank of Dallas found most exploration firms need West Texas Inter-mediate (WTI) at $49 per barrel or higher to profitably drill a well.
28 January 2021 Economic Outlook Report
Wells Fargo Economics & Financial Report / Feb 08, 2021
In our recently released second report in this series of economic risks, we focused on the potential of demand-side factors to lead to significantly higher U.S. inflation in the next few years.
This Week's State Of The Economy - What Is Ahead? - 10 September 2020
Wells Fargo Economics & Financial Report / Sep 12, 2020
Although the recovery from the COVID recession is still far from over, the U.S. economy is bouncing back faster than many expected.
