Boockvar on GDP, Income/Spending/Savings
The following is from Peter Boockvar:
Quick rundown on GDP, income/spending/savings rate & claims
Q3 GDP rose at a 3.4% q/o/q annualized rate, just above the estimate of 3.2% but was notably helped out by the price deflator which rose 2.3% instead of 3.2% as estimated. So, if it came in as forecasted, real GDP would have risen by 2.5% instead.
Personal consumption added 252 bps to GDP with another notable contribution from healthcare spending which added 56 bps of that with overall services contributing 189 bps to growth. Spending on food service/accomodations and housing/utilities were the other large adds to personal consumption. Spending on durable goods added 17 bps while nondurables added 47.
Not surprisingly, AI spend was a nice boost to growth. Adding up ‘info processing’, ‘industrial equipment’, ‘software’, and ‘R&D’ together, that contributed about 150 bps to growth. On the soft side, residential construction was a continued drag, not surprisingly.
A sharp rise in inventories was also a help to the headline figure, adding 161 bps to GDP while trade was a detractor of 332 bps because of AI as imports (much of which is tech) took away 264 bps.
Government spending added 90 bps to GDP with it all federal as state/local was flat in terms of contribution.
Bottom line, on a y/o/y basis, GDP growth was up 2.1% vs 2.2% in Q2 and 2.6% in Q1 and averaging 2.7% in the first three quarters of the year vs 2% in 2025. We know though the narrow but very large contributors to this.
The September PCE inflation stats were spot on as expected, rising .5% headline m/o/m and .3% core with 3.6% and 3.1% y/o/y increases. With CPI and PPI already on the board, these figures usually come in as estimated.
Income and spending figures were also as expected but because spending continues to exceed income, the savings rate fell to 3.8% from 4% and to the lowest since July 2008 not including the post Covid decline into 2022. Part of this decline is the rising wealth of those that own assets that feel less need to save from income and part is reflecting those living paycheck to paycheck.
Initial jobless claims remained very low at 194k vs 195k in the week before and that was 4k less than expected. The 4 week average slips to 197k from 198k. Continuing claims were low too at 1.701mm vs 1.722mm in the week before and about 200k under the 2025 trend.
Again, as measured here and not including those that lose their job and don’t file claims because they take a gig worker job and/or receive severance, the pace of fires is low.
