Q3 GDP or How We Injured Our Elbows

                                                           

The release of third-quarter Gross Domestic Product was climactic. The economy grew at a measly two percent pace, after adjusting for seasonality according to the preliminary estimate by the Commerce Department.      October 28, 2021   Today's Top Stories From the Breitbart News Desk The release of third-quarter Gross Domestic Product was climactic. The economy grew at a measly two percent pace, after adjusting for seasonality according to the preliminary estimate by the Commerce Department. That was nearly a full point miss below the consensus estimate and very close to the bottom of the range of forecasts. Perhaps more importantly, it was a fraction of the forecasts for third-quarter growth that most Wall Street analysts were putting out at the start of the quarter. At the risk of straining our elbows, we're going to take a moment to pat ourselves on the back. Back on April 29, subscribers of this newsletter were alerted to the possibility that the consensus on growth and inflation might be wrong. We asked: What might happen when the Biden administration's policies hit the economy? We answered: One possibility is the further acceleration that the Biden people predict. Another possibility is next to nothing. Consumers could pull back on spending in anticipation of higher taxes to pay for all this spending. And, finally, the third possibility is liftoff for long-dormant inflation. Right now the market seems to believe acceleration is the most likely outcome, with inflation an outside risk. But this is an unprecedented situation and sentiment around which way things could go might swing violently as new data comes in. To put it differently, four months ago everyone thought growth would be weak in the first quarter. Is the consensus more reliable now that everyone thinks growth will strengthen and inflation will remain contained? We now know that what we got was both two and three, the possibilities that the financial establishment believed were highly unlikely. Consumers pulled back on spending and inflation took off, an almost unbelievable combination. A month later, on May 24, this newsletter pointed out that although the quarterly survey of the National Association of Business Economists showed economists were growing more optimistic about economic growth this year, the public was growing more pessimistic. And we explained why the public souring on the economy, even though it was mostly among Republicans, was worth paying attention to while the expert opinion was not: The decline in May was driven by Republicans taking a far more negative view of the economy in May. Gallup scored GOP confidence at negative 54 in May, down from negative 35 in April. Democrat economic confidence slipped only slightly from a positive 31 to a positive 27. While the partisan divide is stark, the May decline cannot really be chalked up to dislike of Biden or the Democrats on the part of Republicans. It's not like conservatives disliked Biden more in May than April. So this likely reflects something actually going on in the economy. Why did we get this year so right while the establishment media and Wall Street economists got it so wrong? In some sense, the answer is bias. They formulate their forecasts around their political priors. So they incorrectly predicted Trump's tariffs would raise prices and incorrectly predicted Biden's would not. But we have our biases also. The difference is simple: our biases—or, as we like to think of them, our philosophical convictions about economics—are better coordinated with reality than theirs. – Alex Marlow & John Carney Breitbart News Network     TOP STORY   Record Inflation and 95% of Manufacturers Report Supply Chain Disruptions in Kansas City Fed Survey Ninety-five percent of manufacturers in the Tenth District of the Federal Reserve report that they are experiencing supply chain disruptions and shortages, according to the Federal Reserve Bank of Kansas City. The Kansas City Fed said on Thursday the share of manufacturers reporting supply chain disruptions and shortage in September had risen by six percentage points since July of this year, an indication that supply chain problems are worsening. The data come from the Kansas City Fed's monthly manufacturing survey, which covers goods producers in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, and portions of western Missouri and northern New Mexico. [Click here for more]   IN OTHER STORIES... Pending Home Sales Unexpectedly Fell in September as House Affordability Declined Contract signings for home sales fell an unexpected 2.3 percent in September compared with August, as purchases declined all across the United States. Each of the four major U.S. regions saw contract activity decline month-over-month and year-over-year, according to the National Association of Realtors. Compared with a year ago, pending sales are down... [Click here for more]   GDP Grows Just 2% in Third Quarter, Falling Short of Diminished Expectations U.S. economic growth crashed in the third quarter, as the economy grappled with the Delta variant driving a resurgence of Covid-19 infections and supply-chain disruptions. Gross domestic product—the value of all goods and services produced in the U.S.—grew at an annualized rate of two percent from July through September, after adjusting for inflation... [Click here for more]   Report: McDonald's Raises Prices, Closes Stores as Worker Shortage Continues McDonald's says they are forced to raise menu prices as worker wages climb, as well as close down some restaurants due to labor shortages and slower service in some locations, according to reports. The burger giant is raising menu prices in order to sustain the rapidly growing costs of supplies and wages, according to the Wall Street Journal. The report indicated that the company had increased salaries by at least... [Click here for more]

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