Consumer Spending Stalls as Core Inflation Moderates

By Thomson Reuters – Re-Blogged From Newsmax

U.S. consumer spending barely rose in August likely as Hurricane Harvey weighed on auto sales and annual inflation increased at its slowest pace since late 2015, pointing to a moderation in economic growth in the third quarter.

The weak report from the Commerce Department on Friday did little to change expectations that the Federal Reserve would raise interest rates in December. Chair Janet Yellen said on Tuesday the Fed needed to continue gradual rate hikes despite uncertainty about the path of inflation.

“We think current economic conditions are heavily impacted by the effect of the recent hurricanes,” said Chris Rupkey, chief economist at MUFG in New York. “The Fed will rightly look over any soft patch for economic growth in the third quarter.”

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Q3 GDP Growth was Hogwash

By Michael Pento – Re-Blogged From http://www.PentoPort.com

Since most everyone is focused on the upcoming US elections, many investors may not have had the time to peel back the onion on the third quarter US GDP report. So, if you just glanced at the headline GDP number of a 2.9% annualized growth rate, you may have concluded that the US economy was finally on its way to sustainable growth.

That 2.9% read was the biggest in the last two years…and it also beat the median forecast of 2.6%. However, to put that number in perspective, average GDP growth over the past four quarters was only 1.5%, and the average for first three-quarters of 2016 is just 1.7%.

So before you get out your party hats and declare this economic malaise over, there were a few notable concerns in that Q3 GDP report.

First off, consumer spending, which accounts for more than two-thirds of U.S. economic activity and just under 70% of GDP growth, fell significantly during the quarter to an annualized rate of 2.1%. That 2.1% is a little bit over half the level of spending posted in the previous quarter. Also, spending on durable goods fell three-fold from Q2 levels.

Third-quarter growth was also flattered by a buildup in business inventories, as re-stocking shelves added 0.61 percentage points to GDP.

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Britain’s £173 Billion “Debt Timebomb”

By Mark O’Byrne – Re-Blogged From http://www.Gold-Eale.com

UK households are sitting on a £173 billion debt time bomb after once again being lured into a spending splurge by banks and credit card companies.

The startling rise in debt levels due to people splashing out on new cars, TVs, conservatories, luxury items, consumer goods and home improvements was uncovered in an investigation by Money Mail.

With a rise in interest rates imminent for the first time in more than eight years, fears are growing that many families will be left struggling with repayments.

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Really Measuring Real GDP

cropped-bob-shapiro.jpg   By Bob Shapiro

Consider two families. Both have a weekly income of $1000, and both spend it all.

Next year, one family gets a $30 raise (3%) and again spends it all ($1030). The second family does not get a raise, but it borrows $30 and spends all $1030.

Question: Are both families doing just as well, or is one doing better than the other?

My guess is that you can see that it is earnings which are important, rather than spending. I expect that you will agree that family one is 3% better off than family two, which borrowed 3% to match the spending of family one.

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