The Economy Delivers Some Good News Ahead of Thanksgiving
With the US economy steadily recovering from the pandemic, Americans have some things to be thankful for. The US Bureau of Economic Analysis on Wednesday released two reasonably positive reports on the nation’s economic outlook. The first was its quarterly report on Gross Domestic Products (GDP) and Corporate Profits. The second highlighted Personal income and outlays for October 2021.
GDP highlights for Q3 2021
The GDP report shows a 2.1% annual growth rate in Q3, following the 6.1% recorded in Q2. This was slightly higher than the initially projected 2% for that period. The data shows a slight bump to an otherwise rapidly recovering economy.
A decline in consumer expenditure drove a Q3 drop in real GDP businesses across the country. The resurgence of COVID-19 cases has resulted in various limitations and delays in reopening companies in several regions. In addition to this government aid payments— forgiven loans to firms, subsidies to state and local governments, and social benefits to households— also declined in Q3.
The report also indicates that real disposable personal income declined by 4% in Q3, following a 29.1% fall in Q2, showing an improvement. Corporate profits continued to increase after a solid Q2 performance. Profits increased 4.3% following a 10.5% rise in the second quarter.
The improving economic situation, in combination with declining unemployment rates, bodes well for the US economy at Thanksgiving.
More positive economic indicators
The number of unemployment claims filed fell to a 52 year low last week. However, the Labor Department reported that the drop in these claims was exacerbated by the difficulty in adjusting statistics this time of the year. Still, the labor market continues to tighten, with the unemployment rate falling to its lowest since March 2020.
“Real GDP is expected to top 5% in 2021,” Natixis CIB economists Troy Ludtka and Joe LaVorgna wrote on Tuesday. “This would be its best showing since 1984.”
Confidence in the economy
President Joe Biden cited the improving economy in remarks Tuesday ahead of the Thanksgiving holiday.
“We’re experiencing the strongest economic recovery in the world,” Biden said. “Even after accounting for inflation, our economy is bigger and our families have more money in their pockets than they did before the pandemic. America is the only major economy in the world that can say that.”
Nonetheless, polls show Americans are not thankful about the economy this year, especially rising inflation and supply chain shortages, and have pointed the finger of blame at Biden. In response, the Biden White House has been stepping up its messaging on the economy and taking actions to quell inflation, such as announcing a planned release of oil from the nation’s Strategic Petroleum Reserve in an effort to dampen gasoline prices.
About E. J. McKay
E.J. McKay is a Shanghai-headquartered investment bank with a special focus on mergers & acquisitions. We are one of the most long standing independent investment banks in China, with core business of mergers & acquisitions and financing advisory.