Third-Quarter U.S. GDP Grew at an Annualized Rate of 4.9%… In a surprise to many economists (but not the Atlanta Federal Reserve GDPNow model), the U.S. posted some of the best numbers in a decade, outside of the pandemic.
What it means— Economists have been saying that the sky is falling for 18 months. Clouds are gathering, with 8% mortgage rates, and inflation is working through the economy, but we’re making do. In the third quarter, personal consumption and inventory replenishment carried the day. The fourth-quarter growth likely won’t be nearly as rosy but still should be positive, as businesses put some of their stimulus cash, courtesy of the government, to work. While that sounds great, it will keep the central bankers hawkish, which will push yields higher and be no friend of the stock market. Part of what makes the current economic landscape so difficult to forecast is that some firms and industries can borrow government-subsidized funds instead of counting on ever-shrinking commercial and industrial loans. Government-funded inflation will be with us for years.
The big caveat, as always, is war.
September Personal Consumption Index Increased 0.4%, Is Up 3.4% Over Last Year… The core Person Consumption Expenditures Price Index (PCE), excluding food and energy, expanded 0.3% last month and 3.7% over last year. Get real! According to Larry Kudlow on Fox Business, including only food and energy, third quarter inflation is up 6.6%!
What it means— The numbers were right in line with expectations, but that doesn’t mean they were great. Remember, the PCE is the Fed’s preferred inflation index because it adjusts to consumer behavior faster than the Consumer Price Index (CPI). If you’re buying store-brand cereal now instead of your favorite brand because the latter became too expensive, then PCE won’t count that as inflation. In fact, if the store brand costs less than the name brand did before the price hike, the PCE would count that as deflation, because now you spend less on cereal than you did last year. Note that there’s no place in these statistics to track your falling standard of living. The central bankers aren’t blind to this, so while they might cheer for lower PCE numbers, they will remain vigilant in their fight against inflation.
New Home Sales Jumped 12.3% in September… Sales were the highest since February 2022 and up 33.9% over this time last year.
What it means— The annual median new-home sales price eased the most since 2009 from $430,300 to $418,800, but that’s more of a statement on the level of homes that builders are constructing than the overall market. Young people want to buy homes, and current homeowners aren’t moving with mortgage rates over 7%. The jump in new-home sales caused the supply to fall to 6.9 months. The Fed could lead the way out of this by calling it quits on further rate hikes, but with GDP on fire and almost $8 billion on its balance sheet, that doesn’t look likely anytime soon.
General Motors Steps Back from Target of Building 400,000 Electric Vehicles Per Year by Mid-2024… The legacy automaker noted weakness in the electric vehicle (EV) market.
What it means— Did we say we’d make 400,000 EVs by this time? Nah, that must’ve been a projection. Right. GM and other companies were clear that they could have their cake (high-priced, high-profit gasoline SUVs) and eat it, too (EVs). Now, that’s not so clear. GM and Honda are getting a divorce over development of an “affordable” EV.
As the first adopters fade and car companies try to persuade the average Joe to overcome range anxiety and fidget with his car every night in the driveway (if he has one), the carmakers are finding it tough sledding. It will get there, just not on this glidepath.
General Motors and Ford should change their names to Gaslighting Motors because they will be forced to deal with the realities that come with a wholesale change in power, from creating it to transmitting and adopting it. It will take much longer than they championed, and they then will tell us they were just kidding.
The car world would have been smart to listen to Toyota, which has long focused on plug-in hybrids instead of pure EVs, allowing car owners to go 40 to 60 miles on a charge, while also being able to use gasoline for long distances or just convenience.
Man in Spain Fakes Heart Attack 20 Times To Avoid Paying Restaurant Bill… The Lithuanian man in Spain has tried the scam so often that different restaurants near Alicante have warned each other about him. In his last attempt to slip out on the bill when the staff stopped him and demanded payment, he claimed he was going to his hotel to get the money. The staff didn’t believe him and wouldn’t let him go, which is when he threw himself to the ground and faked a heart attack. They didn’t believe that, either, and called the police. The last word was that he had been sent to prison. At least while incarcerated he won’t have to fake heart attacks to get free meals.
Data supplied by HS Dent Research
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What do you do?” ~ John Maynard Keynes
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