The 2021 Q3 GDP number just came out and it was a big miss at 2.0%, it miss the 2.6% consensus. But markets took in stride – bad news means Fed may stay easy for longer. After the wobble of Covid, there was hope that the economy would stabilize and start to improve. Instead, it is rolling over and heading down.
Another worrying aspect of the economy is the trade deficit. The U.S. trade deficit widened to a record high of $73.3 billion in August of 2021, higher than market forecasts of $70.5 billion. Exports edged up 0.5% to $213.7 billion, the highest since May of 2019, boosted by sales of nonmonetary gold and natural gas while shipments fell for autos and parts, civilian aircraft, corn, and travel. Imports were up 1.4% to a new all-time high of $287 billion, namely pharmaceutical preparations, toys, games, organic chemicals, transport, and travel.
The deficit with China increased from $3.1 billion to $28.1 billion. The deficit with Canada increased from $1.4 billion to $5.1 billion, while the deficit with Mexico decreased from $1.9 billion to $6.6 billion. See below and source data here.
A contraction in durable goods orders and the ongoing supply chain issues are causing GDP growth estimates to decline. U.S. durable-goods orders fell 0.4% in September.
The IMF has cut its global GDP growth estimates – see more here. The National Association for Business Economics released a new report Monday that found 66% of NABE members responding to a survey expect the economy to grow by 3% to 5.9% over the next year while 28% were less optimistic, pegging growth over the next year at a far slower 0.1% to 2.9%. See more here.
In its latest GDPNow forecast published, the Atlanta Fed slashed its estimate for real GDP growth in the third quarter of 2021 to just 0.2%, down from 1.2% on October 15, from 6% about two months ago, and down from 14% back in May. The economy is almost in contraction, and the trend is worsening.
In short, everything is slowing. With this reality, one understands why the Biden administration is so panicked in passing a massive economic stimulus infrastructure bill. But it is a double-edged sword. The economy will falter if the infrastructure bill does not pass, but if it does pass in means more inflation. The web we weave, when the government tries to jerry-rig economies.
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