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.
By Zero Hedge – Re-Blogged From http://davidstockmanscontracorner.com
On the surface, US industrial production – the most important component of any manufacturing recovery, or alternatively recession – is solid. In August, Industrial Production surged by 0.6% which was the biggest sequential increase since November. Of course, as we have shown, the only reason industrial production is strong is because of subprime debt-funded auto purchases which have sent new motor vehicle production soaring in recent months, but as long as the recovery narrative is intact, what’s another “little” auto subprime bubble: surely the Fed can make it disappear in “15 minutes.”
On the other hand, there is a huge flashing red light when looking at the entire industrial lifecycle of US manufactured products: while production is brisk, end demand in the form of completed sales, is crashing.