Subscribe to our free, weekly email newsletter!



GDP may be growing but it does not feel that way to consumers

By Jeff Berman, Group News Editor
October 27, 2011

Earlier today, the Department of Commerce announced that U.S. Gross Domestic Product (GDP) rose by 2.5 percent in the third quarter.

While this number is not mind blowing in this economic climate, it is nearly double the 1.3 percent GDP growth we saw in the first quarter. What’s more, it represents the best GDP growth rate in a year.

This is a good sign but it should not even begin to suggest that happy days are here again. But it is better than it could have been…even if things still don’t feel good. That much is obvious, given high unemployment and cautious consumer spending.

Consumer spending, as we all well know, is the engine that drives the economy. That is somewhat problematic on varying levels, but it is worth pointing out that Commerce reported that consumer spending growth for the quarter rose to 2.4 percent. Another thing to note is that real disposable income fell 1.7 percent, representing its biggest decreased in two years.

Nigel Gault, Chief U.S. Economist at IHS Global Insight wrote in a research note that “with incomes down, consumer spending only accelerated because the savings rate dropped by a full percentage point. That’s not a solid foundation for growth.”

Nor is this: the weekly Bloomberg Consumer Comfort Index for the week ending October 23 fell, with the report’s authors saying that consumers were the most pessimistic about the state of the economy since the recession.

This index added that consumer attitudes regarding the state of the economy declined, with 95 percent of respondents having a negative outlook—marking the highest level since April 2009, coupled with consumers being more pessimistic about their personal finances.

On the non-consumer side, it is clear that businesses are doing what they can to help drive GDP, as evidenced by the 16.3 percent spike in business fixed investment for the quarter. At the same time, IHS Global Insight’s Gault notes that spending growth outpaced production, with inventories deducted 1.1 percentage points from growth, leading Gault to explain that there is no “excess” inventory to work off.

Interestingly enough, this alarming consumer-related data comes at a time when freight transportation and logistics services providers are reporting strong earnings. But, of course, this is not always directly linked to upticks in consumer demand. Oftentimes it has to do with effective yield management and pricing practices at a time when volumes are relatively flat.

Talking heads on TV and CEOs talking about earnings results may tell you that the economy is showing decent, albeit modest, signs of growth. But to many consumers it still does not feel that way, and it may not for a while.

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Lyon, France-based Norbert Dentressangle, a $5.5 billion global third-party logistics (3PL) services provider focused on global logistics, transport, ocean, and air services, said today it has acquired Des Moines, Iowa-based Jacobson Companies, a value-added warehousing (VAW) company, for $750 million from private equity firm Oak Hill Capital Partners.

Download the newly released research report, "Transportation Management Systems" conducted by Peerless Research Group (PRG) on behalf of Supply Chain Management Review and Logistics Management magazines. Learn what logistic experts are saying about their current supply chain technology infrastructures, how they tackle the transportation component, and revealed the gaps that still need to be filled in order to attain end to-end visibility of a streamlined supply chain.

From cost center to growth center. Get insightful opinions on changes in the marketplace from this independent survey of warehouse personnel. Motorola Solutions examined the current warehousing marketplace in our 2013 Warehouse Vision Report, conducted April-May of 2013.

Even though not all publicly-traded less-than-truckload carriers (LTL) have posted second quarter earnings yet, the early consensus for those that have issued results is looking very good.

The advance estimate for second quarter GDP at 4.0 percent could serve as a sign of a steadier and improving economy.

Article Topics

Blogs · IHS · Logistics · Economy · Freight Transportation · GDP · All topics

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA