STRONG AND STRONGER
Yesterday we got the third estimate of Q2 GDP growth and the annual update to the national accounts:
- Real GDP growth was unrevised at +3.0% a.r. in Q2 with an upward revision to government spending (+0.2pp to +1.5%) and downward revisions to consumption (-0.1pp to +2.8%), nonresidential fixed investment (-0.6pp to +3.9%), and residential investment (-0.8pp to -2.8%). The contribution from inventory investment was revised up (+0.3pp to +1.1pp), while the contribution from net exports was revised down slightly (-0.1pp to -0.9pp).
- Real GDI growth was revised up by 2.1pp to 3.4% in Q2, substantially closing the gap with GDP but not from the side that hard landers expected. As a result of the upward revisions to GDI, the statistical discrepancy—the difference between GDP and GDI—was revised down by 2.4pp and now stands at only 0.3%.
- Real disposable personal income growth was raised from 1.0% to 2.4%.
- As a result, the saving rate was revised up by 1.9pp to 5.2% in Q2. More income, higher savings, the American consumer is in good shape.
- Corporate profits growth was boosted by +9.3pp to 20.4% annualized in nominal terms and employee compensation growth was revised +1.2pp to 6.1% annualized.
Initial jobless claims declined by 4k to 218k in the week ended September 21, against consensus expectations for an increase. The four-week moving average of claims decreased by 3k to 225k. Initial claims this year have followed a similar pattern to 2023, suggesting some residual seasonality.
September Vehicle Sales Forecast: 16.1 million SAAR, Up 2% YoY
From WardsAuto: September U.S. Light-Vehicle Sales Forecast for 9-Month-High SAAR Despite Drop in Volume (pay content). Brief excerpt:
If September’s outlook holds true, Q3 sales will decline 1.8% year-over-year. However, deliveries in October-December, goosed by two additional selling days vs. the year-ago period, are forecast to rise 7.4% from like-2023, leaving volume for entire-2024 at 15.9 million, up from 2023’s 15.5 million.
On a seasonally adjusted annual rate basis, the Wards forecast of 16.1 million SAAR, would be up 6.4% from last month, and up 2.1% from a year ago.
- The Goldman Sachs Analyst Index (GSAI) increased 13.7pt to 54.9 in September, partially retracing the July and August declines and returning to expansionary territory (Exhibit 1). The composition was strong, as the shipments, new orders, and employment components all increased. The sales (+16.6pt to 60.1) and new orders (+26.0pt to 61.2) components both increased notably. The exports component also increased (+6.2pt to 50.0). The inventories component (+5.6pt to 54.8) and the orders less inventories gap (+20.4pt to 6.4) both increased. The GSAI’s labor market components were mixed-to-strong, as the employment component increased (+8.9pt to 51.4) while the wages component ticked down (-0.4pt to 57.9).
ECB Rate-Cut Bets Jump as France, Spain Inflation Sinks Below 2% Prices rose 1.5% in France in September, 1.7% in Spain
Analysts had expected readings of 1.9% for each country. A separate ECB survey showed consumers expect prices to rise more slowly over the coming years. (…)
There were further signs of weakness Friday in Germany, where unemployment rose more than anticipated this month — signaling that another economic rough patch is having an increasing impact on the labor market. (…)
After this morning’s data, markets boosted bets on another quarter-point reduction in rates on Oct. 17, now pricing about an 80% chance of such a scenario. (…)
The ECB has warned, however, that price gains in the region will probably pick up again later this year, with the retreat back to target unlikely to be fully complete until late 2025. (…)
For the ECB, however, headline inflation numbers have been taking a back seat to readings of price pressures in the services sector, which exceeded 4% in August and are frequently cited by hawks as grounds for prudence when cutting rates.
France’s September data also showed a moderation in services, where inflation eased to 2.5% from 3%. (…)
Spanish inflation fell to 1.5% in September from 2.3% in August, according to initial inflation figures released this morning by Spain’s statistics office INE. This decline exceeded consensus expectations. The HICP also fell to 1.7% from 2.4% last month.
The evolution is mainly driven by the fall in fuel prices and, to a lesser extent, the decrease in food and electricity prices compared with September 2023. Core inflation, excluding food and energy, also fell to 2.4% from 2.7% in August. The continued decline in Spanish core inflation in September is good news for the European Central Bank as it shows that underlying price pressures continued to ease in September, helping the ECB move closer to its target inflation rate. (…)
Today, year-on-year GDP growth for Spain was revised up from 2.9 to 3.1% for the second quarter of 2024. Selling prices in both the manufacturing and service sectors are expected to rise, as an increasing share of Spanish companies plan to increase their prices in the coming months.
Additionally, the proposed reduction in working hours from 40 to 37.5 hours, which the current Spanish government is committed to, could increase company costs if not accompanied by sufficient productivity improvements. If demand is strong enough, this could result in further upward pressures on inflation.