US Growth Accelerates to 2.4% on Resilient Consumers, Companies(bloomberg.com)
bloomberg.com
US Growth Accelerates to 2.4% on Resilient Consumers, Companies
https://www.bloomberg.com/news/articles/2023-07-27/us-gdp-growth-accelerates-to-2-4-as-consumers-show-resilience
46 comments
Why is a household spending more money a good thing and not caused by rampant inflation? I don’t understand.
> Why is a household spending more money a good thing and not caused by rampant inflation?
Because it's being driven by "current-dollar personal income increas[ing] $236.1 billion in the second quarter" [1]. Also, the "personal saving rate—personal saving as a percentage of disposable personal income—was 4.4 percent in the second quarter, compared with 4.3 percent in the first quarter.”
Together, these data provide evidence for consumers spending from a position of strength, rather than being forced to.
[1] https://www.bea.gov/news/2023/gross-domestic-product-second-...
Because it's being driven by "current-dollar personal income increas[ing] $236.1 billion in the second quarter" [1]. Also, the "personal saving rate—personal saving as a percentage of disposable personal income—was 4.4 percent in the second quarter, compared with 4.3 percent in the first quarter.”
Together, these data provide evidence for consumers spending from a position of strength, rather than being forced to.
[1] https://www.bea.gov/news/2023/gross-domestic-product-second-...
Doesn’t people saving more imply a low level of confidence in their economic future?
Kind of like storing food for a long winter?
Kind of like storing food for a long winter?
> Doesn’t people saving more imply a low level of confidence in their economic future?
In the long run "households reduce their savings rate when consumer sentiment is high" [1]. In the short run, "higher interest rate is associated with higher personal savings rates while increases in real disposable income are associated with declines in the savings rate."
But households today aren't choosing to save rather than spend; they're increasing both. All while interest rates are high and household debt to GDP remains stable [2].
[1] https://www.researchgate.net/profile/James-Payne-4/publicati...
[2] https://fred.stlouisfed.org/series/HDTGPDUSQ163N
In the long run "households reduce their savings rate when consumer sentiment is high" [1]. In the short run, "higher interest rate is associated with higher personal savings rates while increases in real disposable income are associated with declines in the savings rate."
But households today aren't choosing to save rather than spend; they're increasing both. All while interest rates are high and household debt to GDP remains stable [2].
[1] https://www.researchgate.net/profile/James-Payne-4/publicati...
[2] https://fred.stlouisfed.org/series/HDTGPDUSQ163N
I don't know about most people (and assume I'm the odd one here), but when times are good, I dramatically increase the amount I'm saving. Times are good, after all, so I can set more aside without increasing any pain.
When times are in-between good and bad, I save at a much slower rate (my baseline savings rate of 10% of my net income). Right now, that's what I've been doing -- but I think I'll be increasing the rate of savings here soon. Things seem to be easing.
When times are bad, I'm more likely to dip into my savings.
My saving rate isn't tied to where I think the economy will be tomorrow, it's tied to where my personal economic situation is in the moment.
Basically, I don't vary my standard of living according to the state of the economy. I vary my savings rate instead.
When times are in-between good and bad, I save at a much slower rate (my baseline savings rate of 10% of my net income). Right now, that's what I've been doing -- but I think I'll be increasing the rate of savings here soon. Things seem to be easing.
When times are bad, I'm more likely to dip into my savings.
My saving rate isn't tied to where I think the economy will be tomorrow, it's tied to where my personal economic situation is in the moment.
Basically, I don't vary my standard of living according to the state of the economy. I vary my savings rate instead.
The GDP growth figure is adjusted for inflation.
GDP not outpacing inflation (2.97% last quarter) with such abysmal velocity (1.37%) is not great. It means money is moving slowly through the system because there is far more in the supply than in the past and the economic activity its generating is heavily influenced by price increases instead of confidence and surplus spending.
How much of that spending is fueled by debt? How much of that is high interest debt? How much of the pullback is because of student-loan repayment looming?
If the yield curve wasn't inverted I'd be more optimistic.
Edit: This is an inaccurate assessment.
How much of that spending is fueled by debt? How much of that is high interest debt? How much of the pullback is because of student-loan repayment looming?
If the yield curve wasn't inverted I'd be more optimistic.
Edit: This is an inaccurate assessment.
> GDP not outpacing inflation (2.97% last quarter)
This is real GDP [1]. The 2.4% is inflation adjusted.
[1] https://www.bea.gov/news/2023/gross-domestic-product-second-...
This is real GDP [1]. The 2.4% is inflation adjusted.
[1] https://www.bea.gov/news/2023/gross-domestic-product-second-...
Thank you, I am mistaken.
I feel like I’m being gaslit every time I hear how great the economy is.
I’m spending so much more for basic essentials like food, gas, and rent that there isn’t nearly as much disposable income and money left to save and invest as there was a few years ago. I’ve even received a few pay raises in that time, but they haven’t come close to keeping up with inflation. Maybe the people that think it’s a good economy don’t have kids to feed?
I’m spending so much more for basic essentials like food, gas, and rent that there isn’t nearly as much disposable income and money left to save and invest as there was a few years ago. I’ve even received a few pay raises in that time, but they haven’t come close to keeping up with inflation. Maybe the people that think it’s a good economy don’t have kids to feed?
I think one of the hard parts about macro economic data is it can be very divorced from individuals experiences precisely because it takes into account all the highs and lows.
When all the high inflation stuff was coming out I was baffled. My home expenses were essentially flat. And coming off of covid my savings and investments were stacked. But I wasn’t trying to buy a car and my mortgage was pre rate hikes, and I rarely drive and am in good health. It’s entirely possible there wasn’t any inflation for me.
When all the high inflation stuff was coming out I was baffled. My home expenses were essentially flat. And coming off of covid my savings and investments were stacked. But I wasn’t trying to buy a car and my mortgage was pre rate hikes, and I rarely drive and am in good health. It’s entirely possible there wasn’t any inflation for me.
The grocery store and the gas pumps are where I feel inflation the most.
Are you sure it is not your state’s gas taxes?
https://fred.stlouisfed.org/series/GASREGCOVW
Gas prices are not any higher than they were throughout the 2010s.
https://fred.stlouisfed.org/series/GASREGCOVW
Gas prices are not any higher than they were throughout the 2010s.
The fed chart is adjusted for inflation, so the numbers at the pump are higher. Do you have any reason to believe that gas taxes have increased in the past decade? The federal tax has not increased since 1993, and is not indexed for inflation.
Where do you see that the chart is adjusted for inflation? The prices match up with my memory of nominal prices, especially the spike in 2008.
State gas taxes do change often. For example, Washington’s gas taxes went up at least $0.50 since Jan 1 (and it is variable based on the price carbon credits get auctioned at).
https://ecology.wa.gov/blog/february-2022/the-climate-commit...
State gas taxes do change often. For example, Washington’s gas taxes went up at least $0.50 since Jan 1 (and it is variable based on the price carbon credits get auctioned at).
https://ecology.wa.gov/blog/february-2022/the-climate-commit...
Gas prices under Biden are definitely higher than at any point during Trump's Presidency. There were points where gas was expensive during the "Dubya" and Obama administrations too.
https://www.forbes.com/sites/rrapier/2023/03/08/average-gaso...
https://www.forbes.com/sites/rrapier/2023/03/08/average-gaso...
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Inflation at our favorite restaurants has been breathtaking.
> feel like I’m being gaslit every time I hear how great the economy is
The economy is getting healthier, but it was recently very sick. Many Americans are better off today than they were last year, but worse off than they were in 2020. This is best illustrated by a chart of real earnings [1].
[1] https://fred.stlouisfed.org/series/LES1252881600Q
The economy is getting healthier, but it was recently very sick. Many Americans are better off today than they were last year, but worse off than they were in 2020. This is best illustrated by a chart of real earnings [1].
[1] https://fred.stlouisfed.org/series/LES1252881600Q
Minor nit, the wage explosion was _wild_. Basically we moved a bunch of workers that were going to retire in the next ~5 years into a single year and stomped on immigration.
Suggesting that it coming off of that to a more normal growth pattern makes the economy very sick seems like a mischaracterization.
Suggesting that it coming off of that to a more normal growth pattern makes the economy very sick seems like a mischaracterization.
> Suggesting that it coming off of that to a more normal growth pattern makes the economy very sick seems like a mischaracterization
Sorry if I was unclear. The sickness was the literal pandemic. The economy isn't currently sick, but it's not as robust as it was in recent memory. Many Americans can reasonably look at the data, see everyone remarking at the economy's unexpected strength, find themselves in no better condition than they were half a decade ago, and feel tempted to call shenanigans on the whole thing.
Sorry if I was unclear. The sickness was the literal pandemic. The economy isn't currently sick, but it's not as robust as it was in recent memory. Many Americans can reasonably look at the data, see everyone remarking at the economy's unexpected strength, find themselves in no better condition than they were half a decade ago, and feel tempted to call shenanigans on the whole thing.
Prob because this is financial news for wall street and boglehead types, not your average Joe. But I agree - I feel the press is very optimistic about things w/o going deeper into the systemic problems.
Bogleheads would not need financial news. Their whole thing is ignoring news and just buying and holding as long as possible.
What blows my mind is that Joe Biden and his administration have been talking about “Bidenomics” and touting the current economy like it’s a strength for him going into reelection instead of a liability. I just can’t wrap my head around that. Are we living in the same America? It really feels like I’m being gaslit.
Because in every metric the economy is doing well.
Those metrics are disconnected from middle class reality.
What metrics are you looking at for your claims
The ones that matter to me personally. Namely my paycheck, price stickers, my bills, and my bank account. The rest of the metrics are mostly for economists and rich people.
This is my experience and that of everyone I talk to in my daily life. It's like a very weird bubble on HN and in the media, where people are ignoring things like "my tracked expenses for groceries are 60% higher than they were in 2019, and my restaurant budget has grown though I go out to eat 1/3 as much"
I don't have to guess about these things, I have receipts. Still, everyone here and on the news tells me things are great!
I don't have to guess about these things, I have receipts. Still, everyone here and on the news tells me things are great!
The party in 1984 was proud to increase chocolate rations.
It being a "good" economy has little to do with your purchasing power or real income. That's the fatal flaw of pure capitalism: So long as economy activity is increasing, everything is good.
Doesn't matter if the benefits go to 1% of the population. Doesn't matter is it is at the expense of people's health or solvency. From a capitalist standpoint, more people in debt is good because it creates money out of thin air [1]. More people sick is good because that increases the size of the health market, et cetera.
[1] https://www.bankofengland.co.uk/explainers/how-is-money-crea...
Doesn't matter if the benefits go to 1% of the population. Doesn't matter is it is at the expense of people's health or solvency. From a capitalist standpoint, more people in debt is good because it creates money out of thin air [1]. More people sick is good because that increases the size of the health market, et cetera.
[1] https://www.bankofengland.co.uk/explainers/how-is-money-crea...
> More people sick is good because that increases the size of the health market, et cetera.
See the Parable of the Broken Window, 1850.
See the Parable of the Broken Window, 1850.
And managers will attribute these gains to everyone working back in the office again
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The entire world is choking and the US economy is just chugging along.
I don't live in the US, I had a friend recently disclose that she uses a food bank more than once a month.
If some politician came along and offer a MAGA approach to my country I'd vote for them.
I don't live in the US, I had a friend recently disclose that she uses a food bank more than once a month.
If some politician came along and offer a MAGA approach to my country I'd vote for them.
>If some politician came along and offer a MAGA approach to my country I'd vote for them.
Then you should educate yourself on what populist politicians promise and what they end up delivering.
Then you should educate yourself on what populist politicians promise and what they end up delivering.
Eh, better be promised something you want and risk it not being delivered. Then promised the opposite and get that for sure.
What would a "MAGA" approach look like for your country?
mXga, solve for X
Probably stop spending tax money on weapons for Ukraine and spend it on the NHS.
The US has the extraordinary economy to afford it. We can't even support single parent families with enough to eat.
The US has the extraordinary economy to afford it. We can't even support single parent families with enough to eat.
As a consumer I would prefer less spending
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