For the U.S. GDP, a slight improvement of some very bad numbers is an improvement, technically.
But the bar was set pretty low, and the question becomes: What’s next?
In terms of the headline data, a record is a record. The U.S. GDP declined at a historic rate last quarter.
But we’re right at the end of the third quarter, so the swing is going to feel like whiplash.
As reported by the Commerce Department on Wednesday (Sept. 30), GDP declined by 31.4 percent in the second quarter (as measured quarter over quarter), a few basis points better than the 31.7 percent that had been estimated previously. As reported by CNBC, the latest reading is leagues beyond the previous “worst” reading, also down double digits, 10 percent, in 1958.
And looking ahead, noted the site, GDP is projected to accelerate by 30 percent (annualized) in the third quarter. That comes on the heels of business reopenings, supply chains coming back to life and people returning, even, to brick-and-mortar establishments. Records here, records there. The 30 percent rally in GDP for the September report, if achieved, will far outpace the previous 16.7 percent growth record, logged 70 years ago, in 1950.
At least some continuation of that growth, into the fourth quarter and beyond, would hinge in part on renewed stimulus funding – and, of course, how the all-important holiday shopping season fares.
Drilling down a bit, the Department gave a bit of insight into what dragged down GDP in terms of industry impact.
“Private goods-producing industries decreased 34.4 percent, private services-producing industries decreased 33.1 percent and government decreased 16.6 percent. Overall, 20 of 22 industry groups contributed to the second-quarter decline in real GDP.” The only two industries that bucked the trend, said the Commerce Department: finance and insurance. Durable, goods-producing companies were among the hardest-hit among firms that actually make things; food services and drinking places were the most hurt among service-oriented firms.
And consumer spending, the engine widely known to be behind roughly two-thirds of the economy, was down 33.2 percent, while previous estimates had pegged that slide at 34.1 percent.
We’ll likely see a torrid snapback in this metric, too, when third-quarter data are released at the end of the month. Recent readings of retail data show at least some return to consumers opening up their proverbial wallets and purses. As noted in this space earlier in the month, the U.S. Census Bureau reported that retail sales in August were up 60 basis points over July. But even that number represents a slowdown from the 90-basis-point gains seen in July (itself revised down by 1.2 percent over June). Sales at non-store retailers, including online sales, were flat versus the previous month, with no back-to-school surge.
And proprietary research from PYMNTS found that total retail and foodservice sales were roughly $546 billion in August, down from the roughly $551 billion in July. That’s a change from historical norms, when August is usually higher than July.
The trend seems a bit lumpy, then, but will still be backward-looking. The devil – and the sustainability – of the great GDP rebound will be in the details.