By Matthew Kerkhoff
First, a few comments about the latest GDP report. The first estimate for the 3rd quarter came in at 1.5%, eliciting comments of a slowdown from the 2nd quarter’s 3.9% growth.
But beneath the surface, key drivers of the economy remained strong. Excluding the trade and inventories categories, GDP rose at a 2.9% rate. This speaks to the health of the consumer, who continues to benefit from job and income gains, low inflation and low energy prices.
It also highlights the contrast painted here over the last few months between weakness in manufacturing/international trade and strength in services and domestic consumption.
After-tax incomes for American workers rose at a 3.5% annual rate (inflation adjusted), which allowed them to save more while still expanding consumption at a respectable rate. The 3rd quarter savings rate increased to 4.7% from 4.6%. It’s a good sign when consumers are able to both spend more and ... Log in or subscribe to continue reading.