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

Slowing global trade and a bloated orderbook of large vessel capacity mean that container shipping is set for another three years of overcapacity and financial pain, according to the latest Container Forecaster report published by global shipping consultancy Drewry.

The NRF is calling for 2015 holiday sales to see a 3.7 percent annual gain to $630.5 billion, which comfortably outpaces the ten-year average of 2.5 percent.

On the heels of announcing it plans to acquire freight transportation and logistics services provider Con-way Inc. for $3 billion, XPO Logistics may be considering selling off Con-way Truckload, the company’s truckload arm.

The International Air Cargo Association (TIACA) has called on world leaders meeting at the United Nations this week to work together to find solutions to the ongoing migrant crisis in Europe

More than 20 U.S. port authority officials and their key staff, representing seaports from all four U.S. coasts, will gather on October 8 to meet with Congressional leadership to discuss the upcoming surface transportation bill and the U.S. Army Corps of Engineers’ navigation budget.

Article Topics

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


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

© Copyright 2015 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA