With apologies to all, I have to say it: The U.S. economy is no turkey.
Today’s revision of the U.S. third quarter gross domestic product (GDP) took a surprise leap upward to 3.9% from the original estimate of 3.5%. The consensus among economists had been that it would dip to 3.3%.
The revised GDP figures reflect the strengths of the U.S. economy, observes Chad Moutray, chief economist of the National Association of Manufacturers.
“Consumer spending rose 4.3% in the third quarter, extending the 5.9% gain seen in the second quarter. As such, these data indicate that demand has rebounded strongly since the weather-induced softness experienced in the first quarter.”
“Fixed business investment added another 0.97 percentage points, with firms increasing their spending on structures, equipment and intellectual property. In fact, fixed investment grew 6.2% at the annual rate in the third quarter, up from the original estimate of 4.7%.”
“On the trade front, goods exports grew a little slower than originally reported, up an annualized 6.7% instead of 11.0%. As a result, net exports contributed 0.78% to real GDP in the third quarter, which was less than the 1.32 percentage points noted last month. Still, even with the lower figure, it is important to note that this was the first positive contribution from net exports this year…”
Reports on manufacturing over the past few days from regional Federal Reserve banks have been encouraging. New York, Philadelphia and Kansas City all reported growth in November. Texas manufacturing activity also picked up in November, the Dallas Fed reported, though the pace of growth tapered. The production index, capacity utilization index and new orders index all fell, but remained in positive territory. And the bank reported that Texas manufacturers continue to have a sunny outlook about business conditions.
“Expectations regarding future business conditions remained optimistic in November. The index of future general business activity rose 5 points to 18.3, while the index of future company outlook held steady at 23.1. Indexes for future manufacturing activity held steady or improved in November.”
The Chemical Activity Barometer, a leading economic indicator created by the American Chemistry Council (ACC), logged a 0.2% gain in November, following an upward revision in October which reflected zero growth, as measured on a three-month moving average.
“The year-over-year comparisons have moderated since the summer suggesting an economy continuing to face headwinds and modest gains. The CAB remains up 3.7% over this time last year.”
In his November review of the economy, Jack Kleinhenz, chief economist for the National Retail Federation, says leading economic indicators support “our expectations of improved growth in coming quarters.”
“Consumers are feeling better about the condition of the economy with lower gas prices, an improving labor market, the rise in the stock market and low inflation.”
The bottom line, says James Marple, a senior economist with TD Economics, is that “the U.S. recovery is firmly on track.”
“Driven by strengthening consumer spending and business investment, domestic demand is likely to accelerate to above 3.0% over the next year. While net-exports will subtract from growth, it will not be enough to prevent the economy from accelerating. This is all the impetus the Fed needs to begin moving rates higher.”