Monday Economic Report: Real GDP Jumped 33.1% at Annual Rate in Q3, Still Down 3.5% Year to Date

AICC, through its membership in the Council of Manufacturing Associations, is pleased to present the "Monday Economic Report" from the NATIONAL ASSOCIATION OF MANUFACTURERS (NAM).

By Chad Moutray, Ph.D., CBE – November 2, 2020

NAM Weekly Headlines

The U.S. economy bounced back strongly, jumping 33.1% at the annual rate in the third quarter, the largest increase in the history of the series, which dates to 1947. This follows the steepest decline in history in the second quarter, contracting 31.4% at the annual rate. Despite soaring in the third quarter, real GDP remained down 3.5% year to date. Moving forward, real GDP is expected to rise an annualized 3.0% in the fourth quarter, but uncertainties continue to exist in the marketplace, which could challenge that outlook. Overall, the U.S. economy is predicted to shrink 3.3% in 2020, with 4.0% growth forecasted for 2021. Personal consumption expenditures rose 1.4% in September, increasing strongly for the fifth straight month. Durable goods spending jumped 3.0% and 1.5% in September, respectively. Still, spending remains subdued (particularly for services), with the saving rate continuing to be highly elevated at 14.3% in September. Personal spending has fallen 0.6% year-over-year, pulled lower by consumers spending 4.6% less on services than one year earlier. Consumer confidence readings provided mixed results, with the Conference Board’s measure easing slightly and the University of Michigan’s headline index rising to the best reading since March. Americans’ assessments of the labor market have improved, but worries about COVID-19 and the election remain top-of-mind for consumers. Initial unemployment claims totaled 751,000 for the week ending Oct. 24, down from 791,000 for the week ending Oct. 17. At the same time, continuing claims declined from 8,465,000 for the week ending Oct. 10 to 7,756,000 for the week ending Oct. 17, consistent with 5.3% of the workforce. Meanwhile, manufacturing data have been mostly solid. New orders for durable goods rose 1.9% in September, with the sector continuing to bounce back from steep declines in the spring. Core capital goods spending rose 1.0% in September to the highest level in six years. New durable goods orders remained down 1.9% year-over-year, but with transportation equipment excluded, orders have risen 1.7% over the past 12 months. Regional manufacturing surveys from the Dallas and Richmond Federal Reserve Banks were also encouraging, with respondents upbeat in their outlook. In advance statistics, the goods trade deficit pulled back from an all-time high. Goods exports rose to the best reading since March, with goods imports off slightly. New single-family home sales declined 3.5% in September, the first monthly decrease since April, but sales have jumped 32.1% year-over-year, buoyed by historically low mortgage rates but suffering from very low inventories of homes for sale. Despite higher costs in recent months, the core PCE deflator has increased 1.5% over the past 12 months, and the Federal Reserve continues to be more worried about economic growth than inflation. READ FULL REPORT