Some of the main takeaways from US Q3 GDP 2nd estimate

The growth trend is still fundamentally weak, over reliant on consumer credit and exposed to a potential inventory correction.

Post the debt fuelled 90s and 00s, growth has tailed off as shown by the annualised real growth rate over rolling 5 year time periods.  As noted in prior posts, growth between the 90s and onset of the “crisis” was very likely overly leveraged:

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Growth is still historically weak and if we take away increases in consumer credit and adjust for inventories, the trend remains so:

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And the longer term nominal perspective:

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The differential between the annual growth in consumer credit and the growth in personal consumption expenditures remains elevated within a path it has occupied since the early 1990s:

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And we can see the divergence between debt to PCE and personal disposable income to PCE here:

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And here is personal consumption expenditure relative to income and we can see that recently expenditure has pushed ahead of income by a significant margin:

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And here also with respect to growth in PCE relative to growth in wages and salaries:

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Nominal growth in personal consumption expenditure has more or less flatlined since the late 1990s:

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In real terms, PCE has benefited from the recent declines in energy prices:

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Interestingly, once we adjust for health expenditures, personal consumption expenditure as a % of GDP has also flatlined for more than a decade:

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Overall PCE has continued to climb:

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In fact, health care expenditures have been outsized of late, contributing significantly to PCE expenditure and from thence to GDP growth:

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And there does seem to be correlation in health care expenditure and GDP growth:

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The PCE component of real GDP has also been high and this also looks to be influenced by higher health care expenditure:

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Export growth continues to weaken:

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Service sector expenditure has been rather solid, but looks to be turning, and again, much of this is likely influenced by health care expenditure:

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Real equipment expenditure growth is declining on an average 4 quarterly basis:

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And inventories remain, alongside consumer credit growth, a black cloud on the horizon…

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