- U.S. gross domestic product (GDP) grew at an annualized pace of 2.0% in the third quarter
- The Consumer Confidence Index rose 4% in October
- The PCE Price index rose 4.4% in September compared to the prior year
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GDP Growth Slows in Q3: The Commerce Department last week provided its first estimate of Q3 2021 U.S. gross domestic product (GDP), a measure of all goods and services produced. According to the report, GDP grew at an annualized pace of just 2.0% from July to September, a material slowdown from the Q2 pace of 6.7% and the weakest reading in five quarters. Growth in Q3 was impacted by both renewed Covid-19 restrictions and growing supply chain logjams. In particular, empty new car lots and parts shortages led to a dramatic decline in expenditures on motor vehicles and parts, which dragged overall consumer spending down to an annualized growth rate of 1.6% in Q3, versus 12% in the prior quarter.
Consumer Confidence Improves: Consumers in the U.S. demonstrated marginally greater optimism in October as anxieties surrounding the COVID-19 delta variant diminished. The Conference Board last week reported a modest increase in its Consumer Confidence Index from 109.8 in September to 113.8 in October. Survey results showed the proportion of consumers intending to purchase big-ticket items like homes and autos increased, while almost half of respondents indicated plans to take a vacation in the next six months, the highest level since February 2020. Despite the rebound, however, the Index remained below its post-pandemic high of 128.9 in June 2021.
Personal Spending Rises: The Bureau of Economic Analysis (BEA) reported last week that personal consumption expenditures (PCE), a measure of consumer spending for all goods and services, rose 0.6% in September compared to the prior month. The gain was driven by demand for services such as healthcare, food services, and hotel accommodations, which offset a decrease in durable goods purchases, which partly reflected tight inventories of motor vehicles and parts. The release also reported that the PCE Price Index rose 4.4% versus last year, equal to the prior month’s rate, reflecting sharp increases in energy and food prices.