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GDP Rises 2.0% Entirely Due to Building Inventories, Consumer Spending Weak

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14 comments on GDP Rises 2.0% Entirely Due to Building Inventories, Consumer Spending Weak

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Gross Domestic Product, Third-Quarter 2021

According to the BEA’s Advance Estimate, the Gross Domestic Product for the third-quarter of 2021 rose 2.0%. 

The increase in real GDP in the third quarter reflected increases in private inventory investment, personal consumption expenditures (PCE), state and local government spending, and nonresidential fixed investment that were partly offset by decreases in residential fixed investment, federal government spending, and exports. Imports, which are a subtraction in the calculation of GDP, increased.

The 2.0% is on a seasonally-adjusted annualized basis. For the quarter, GDP was up 0.5% on a seasonally-adjusted basis.

Detail Breakdown

Rick Davis at the Consumer Metrics Division provides the pertinent details.

  • The entire headline number consisted of inventory growth, and the BEA’s bottom line ‘real final sales of domestic product’ was reported to be in slight contraction at -0.07%. 
  • Inventories added 2.07% to the headline number, up 3.33 percentage points from the prior quarter. It is important to remember that the BEA’s inventory numbers are exceptionally noisy (and susceptible to significant distortions/anomalies caused by commodity pricing or currency swings) while ultimately representing a zero reverting (and long term essentially zero sum) series. 
  • Consumer spending was weak, as spending on goods contracted at a 2.32% rate and the growth rate for all consumer spending was down 6.84 percentage points from the prior quarter. 
  • The contribution to the headline from consumer spending on services was reported to be 3.40%, down 1.53 percentage points from the prior quarter. The combined consumer contribution to the headline number was 1.08%, down 6.84 percentage points from the prior quarter. 
  • The annualized growth in the ‘real final sales of domestic product’ was reported to be -0.07%, down 8.05 percentage points from the prior quarter. This is the BEA’s ‘bottom line’ measurement of the economy (and it excludes the inventory data). 
  • Real per-capita annualized disposable income decreased by $723 quarter to quarter. 

Summary

  1. GDP rose entirely due to an inventory build. 
  2. The “pandemic recovery” led by consumer spending spree has softened. 
  3. Commercial fixed investments shifted into neutral. 

The report was stronger than I expected. Nonetheless, this was a weak report. 

Real GDP in Billions of Dollars 2021

It’s important to note that although the recession is over, GDP did not regain the prior trendline.

Key Question

In the absence of free money pandemic support from the government, will consumers show up in a big way Christmas?

If not, merchants will have a big problem with that inventory build.

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Mike Shedlock

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14 Comments
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xbizo
xbizo
4 years ago
With shipping costs rising directly and indirectly, how do you see a shift to air freight and using great lakes ports balancing the dock shortage issue?  Is that something that can happen over a couple of months?  There should be excess aircraft available, and I know great lakes ports are not used anywhere near their capacity.
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oee
oee
4 years ago
Now, that the GPD dissapointed you by not being negative. You are trying to find anthing wrong. The economy will bounce back in this quarter and next year. Inflation will less. 
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JeffD
JeffD
4 years ago
No problem. They’ll just print more to keep the “real” GDP growth on a pre determined fixed trajectory. Unfortunately, the real world isn’t as sunny as fiction.
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Tony Bennett
Tony Bennett
4 years ago
international civil unrest begins in …
The FAO Food Price Index (FFPI) is a measure of the monthly change in international prices of a basket of food commodities. 
 The FAO Food Price Index (FFPI) averaged 130.0 points in September 2021, up 1.5 points (1.2 percent) from August and 32.1 points (32.8 percent) from the same month last year. 
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RonJ
RonJ
4 years ago
Reply to  Tony Bennett
One has to wonder why Bill Gates has been buying up so much farm land.
Twilight Zone episode, To Serve Man. “it’s a cook book.” Gates wants the U.S. government to buy doses of vaccines from the Big Pharma companies to give to poorer countries, instead of sharing the proprietary data, so they can manufacture their own.
Gates also bought up a testing company, now that the faulty PCR test is being terminated.
Philanthropist or opportunist?
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Tony Bennett
Tony Bennett
4 years ago
BEA uses a price deflator of 5.7% for Q3 (6.1% Q2) … yet still balls to the wall monetary policy …
Scotty: I’m givin’ it all she’s got, Captain! If I push it any farther, the whole thing’ll blow!
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RonJ
RonJ
4 years ago
Zero Hedge: “FDA Committee Members Reviewing Pfizer Vaccine For Children Have Worked For Pfizer, Have Big Pfizer Connections”
Jab the kids for GDP.
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Tony Bennett
Tony Bennett
4 years ago
“If not, merchants will have a big problem with that inventory build.”
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Yes, current situation is build inventory first and then … pray.
Business really has to build to front run price increase + vendors telling them you better order while we still got it.
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randocalrissian
randocalrissian
4 years ago
Reply to  Tony Bennett
Better to have your inventory in the warehouse than on a container ship in a drift box.
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Carl_R
Carl_R
4 years ago
Reply to  randocalrissian
The inventory still on boats would be included in inventory.
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anoop
anoop
4 years ago
where are people that were forced out of their job for not being vaccinated counted?  are they counted as not in the labor force?  they are not allowed to make unemployment claims from what i understand.
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tbergerson
tbergerson
4 years ago
Reply to  anoop
And about to get much worse as all these vaccination deadlines come and go.  Forcing an injection of an emergency use substance on people against their will for such a low level death rate disease (particularly for anyone under 70) is evil.  And probably illegal, though that is still up in the air.  It is when they soon start to order vaccinations for kids with this emergency use substance that all hell is going to break loose.  Kids are essentially immune from serious outcomes from this disease.   And many if not a plurality of them have already had it and recovered.  More will be killed or permanently disabled by the vaccine than by the disease.
The insanity just continues and continues.
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RonJ
RonJ
4 years ago
Reply to  tbergerson
It should be obvious to anyone by now, that it has nothing to do with public health. Early outpatient treatment was always the key to getting Covid-19 under control. Early outpatient treatment was obstructed. The public health agencies agenda was vaccines, not public health. The PHA’s are under regulatory capture, which supersedes the public health. Hundreds of thousands of lives were sacrificed for the benefit of the Big Pharma companies.
Zelenko gave patients 400 milligrams of HCQ. The Oxford study gave 2,400 milligrams, a toxic dose. The study was designed to fail, which it did. That’s not science. That’s agenda. Over 60 positive studies on IVM, still never enough. It’s agenda, not science.
A Marine veteran, on the verge of hospitalization, was denied a prescription for IVM for he and his wife, by a Walmart pharmacist.
He resorted to horse paste, as a result. Both were feeling better within 8 hours of first dose.
The economy has been ruined for no reason related to protecting public health. It has all been for an ulterior agenda, and we continue to suffer because of it.
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tbergerson
tbergerson
4 years ago
Reply to  RonJ
You are preaching to the choir here with me.   Sure the vaccines are effective-ish.  They also have the highest adverse reaction rate of all the other vaccines combined, aggregated over a long period of time.
The FDA, CDC and NIH to this day have NO outpatient protocol.  You can look at their sites.  It just says most people can go home and recover.  In other words, go home, if you are about to die, then go to the hospital and we will try some stuff.  But under no circumstances will we even think about using anything that imperils the vaccine EUAs (existing effective treatments).  You can all just go die.  They have been suborned.  For money or power or position.  It represents a Crime Against Humanity.
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