US economy continues to grow, albeit at a slower pace
The US Bureau of Economic Analysis (BEA) released the – Gross Domestic Product, Third Quarter 2019 (Advance Estimate) – data yesterday (October 30, 2019). It shows that the US economy “increased at an annual rate of 1.9 percent in the third quarter of 2019” which was slightly slow than the 2 per cent recorded in the June quarter. As this is only the “Advance estimate” (based on incomplete data) there is every likelihood that the figure will be revised when the “second estimate” is published on November 27, 2019. Underlying the headline figure, however, are shifting expenditure patterns in the US. Household consumption growth is declining and the contribution to growth was down from 3.03 points in une 2019 to 1.93 points. The personal saving rate rose from 8 per cent of disposable income to 8.1 per cent as households tightened up in the face of record levels of debt and sluggish wages growth. Total investment continued to be a negative drain on growth (-0.27 points compared to -1.16 points. Net exports also subtracted from growth (0.08 points compared to 0.68 points in the June-quarter). The increase in disposable personal income was lower (4.5 per cent) than in the June-quarter (4.8 per cent), although in real terms, the growth was 2.9 per cent compared to 2.4 per cent. Overall, and notwithstanding the continued growth, the question for the US growth prospects centre on what will happen to consumption expenditure growth. How much more will it decline and the saving rate rise?