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

Earlier today, the Department of Commerce announced that U.S. Gross Domestic Product (GDP) rose by 2.5 percent in the third quarter. This is a good sign but it should not even begin to suggest that happy days are here again.

By ·

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, 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. Contact Jeff Berman

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!

Article Topics

Economy · Freight Transportation · GDP · IHS · Logistics · All Topics
Latest Whitepaper
The Internet of Things and the Modern Supply Chain
Learn today how the internet of things is transforming supply chain operations.
Download Today!
From the February 2017 Issue
As the new administration sends waves of uncertainly through the global trade community, this could be the best time ever for shippers to build an investment case for GTM. Here are five trends you need to watch if you’re about to put these savvy systems to work
Carrier Consolidation Keeps Shippers Guessing
Getting Value from the Cloud
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Advance your career with the fastest growing logistics certification – APICS CLTD
During this webcast presenters will give an overview of APICS and the new Certified in Logistics, Transportation and Distribution (CLTD) designation. Learn how the CLTD program can help you stay on top of current trends and advance your career.
Register Today!
EDITORS' PICKS
ASEAN Logistics: Building Collectively
While most of the world withdraws inward, Southeast Asia is practicing effective cooperation between...
2017 Rate Outlook: Will the pieces fall into place?
Trade and transport analysts see a turnaround in last year’s negative market outlook, but as...

Logistics Management’s Top Logistics News Stories 2016
From mergers and acquisitions to regulation changes, Logistics Management has compiled the most...
Making the TMS Decision: Ariens Finds Just the Right Fit
The third time is the charm for this U.S. manufacturer on the hunt for a third-party logistics (3PL)...