Rate Watch #1344 – 3rdQ 2021 GDP.  

November 29, 2021

By Dick Lepre

dicklepre@rpm-mtg.com

www.loanmine.com



 A recap of last week's fundamentals is here

The housing market has been a bit strange. There are many more buyers than sellers. If you are buying and cannot pay all cash then you absolutely must have a loan preapproval. This is a letter from us stating that we have your income and asset documentation and your credit report and that you are good for a certain loan amount on a given purchase price.  

 If you are interested in buying fill out this form: http://www.loanmine.com/PurchaseForm

 

Rates are still low, if you want to refinance fill this out:   http://www.loanmine.com/RefinanceForm

 I do the California loans and will refer you to an RPM loan officer in other states.

 

 

Mortgage Rates

 

Mortgage rates are, at present, pulled in opposite directions by two forces. The inflationary effects of expanded money supply and damage to the goods supply chain prod rate higher while Covid concerns drive assets to the safety of fixed income securities driving mortgage rates lower.



 

 

 

GDP


 
I have discussed in recent newsletters that I believe we are headed for an extended period of low (less than 1.5%) GDP growth – stagnation. 

 

What follows is from Rick Davis of Consumer Metrics Institute. Rick does a consistent and excellent job of analyzing GDP each month. One thing Rick points out is that this data is inflation adjusted by BEA but that BEA never explains why the numbers which it uses to adjust for inflation are inconsistent with the number BLS uses to adjust CPI each month.

 Media discussion of GDP looks almost entirely at the total but the factors driving each component are different.
 Rick’s analysis:
 

In their second estimate of the US GDP for the third quarter of 2021, the Bureau of Economic Analysis (BEA) reported that the US economy was growing at a +2.11% annual rate, up 0.11 percentage points (pp) from their previous estimate and down 4.61pp from the prior quarter.

 The upward revision to the headline number came entirely from a more optimistic new estimate of the still contracting consumer spending on goods, which was somewhat offset by a downward revision to consumer spending on services. None of the other changes were material.

 In an earlier release, annualized household disposable income was revised $393 higher than in the previous report, and the household savings rate was reported to be 9.6%, up 0.7pp from the previous report.

 For this estimate the BEA assumed an effective annualized deflator of 5.85%. During the same quarter the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was lower at 4.74%. Over estimating inflation results in pessimistic growth rates, and if the BEA's nominal data was deflated using CPI-U inflation information the headline growth number would have been 3.34%.

 Among the notable items in the report

 -- Consumer spending for goods was reported to be contracting at a 2.11% rate, up 0.21pp from the previous estimate and down 5.10pp from the prior quarter.

 -- The contribution to the headline from consumer spending on services was reported to be 3.29%, down 0.11pp from the previous report and down 1.64pp from the prior quarter. The combined consumer contribution to the headline number was 1.18%, up 0.10pp from the previous report.

 -- The headline contribution for commercial/private fixed investments was revised to -0.20%, down 0.06pp from the previous report and down 0.81pp from the prior quarter.

 -- Inventories added 2.13% to the headline number, up 0.06pp from the previous report and up 3.39pp from the prior quarter. It is important to remember that the BEA's inventory numbers are exceptionally noisy (and susceptible to significant distortions/anomalies caused by commodity pricing or currency swings) while ultimately representing a zero reverting (and long term essentially zero sum) series.

 -- The contribution to the headline from governmental spending was revised to 0.16%, up 0.02pp from the previous report and up 0.52pp from the prior quarter.

 -- The contribution from exports was revised to -0.33%, down 0.05pp from the previous report and down 1.13pp from the prior quarter.

 -- Imports subtracted 0.83% annualized 'growth' from the headline number, up 0.04pp from the previous report and up 0.16pp from the prior quarter. Foreign trade contributed a net -1.16pp to the headline number.

 -- The annualized growth in the 'real final sales of domestic product' was revised to -0.02%, up 0.05pp from the previous report and down 8.00pp from the prior quarter. This is the BEA's 'bottom line' measurement of the economy (and it excludes the inventory data).

 -- As mentioned above, real per-capita annualized disposable income was revised $393 higher than in the previous estimate. The annualized household savings rate was 9.6% (up 0.7pp from the previous report). In the 53 quarters since 2Q-2008 the cumulative annualized growth rate for real per-capita disposable income has been 1.51%.



The Numbers, As Revised 

 As a quick reminder, the classic definition of the GDP can be summarized with the following equation

GDP = private consumption + gross private investment + government spending + (exports - imports) 



 or, as it is commonly expressed in algebraic shorthand

GDP = C + I + G + (X-M) 



 In the new report the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows

GDP Components Table


Total GDP 

(X-M) 

Annual $ (trillions) 

$23.2 

$16.0 

$4.1 

$4.1 

$-.9 

% of GDP 

100.00% 

68.80% 

17.64% 

17.61% 

-4.05% 

Contribution to GDP Growth % 

2.11% 

1.18% 

1.93% 

0.16% 

-1.16% 

 

The quarter-to-quarter changes in the contributions that various components make to the overall GDP can be best understood from the table below, which breaks out the component contributions in more detail and over time. In the table below we have split the "C" component into goods and services, split the "I" component into fixed investment and inventories, separated exports from imports, added a line for the BEA's "Real Final Sales of Domestic Product" and listed the quarters in columns with the most current to the left

Quarterly Changes in % Contributions to GDP


Q3-2021 

Q2-2021 

Q1-2021 

Q4-2020 

Q3-2020 

Q2-2020 

Q1-2020 

Q4-2019 

Q3-2019 

Q2-2019 

Q1-2019 

Q4-2018 

Total GDP Growth 

2.11% 

6.72% 

6.28% 

4.54% 

33.79% 

-31.24% 

-5.13% 

1.89% 

2.77% 

3.22% 

2.41% 

0.89% 

Consumer Goods 

-2.11% 

2.99% 

5.69% 

-0.07% 

9.92% 

-1.89% 

0.04% 

0.35% 

0.99% 

1.42% 

0.29% 

0.44% 

Consumer Services 

3.29% 

4.93% 

1.75% 

2.34% 

15.59% 

-22.21% 

-4.83% 

0.77% 

1.13% 

0.95% 

0.14% 

0.72% 

Fixed Investment 

-0.20% 

0.61% 

2.25% 

2.92% 

4.88% 

-5.63% 

-0.41% 

-0.19% 

0.54% 

1.06% 

0.64% 

0.31% 

Inventories 

2.13% 

-1.26% 

-2.62% 

1.10% 

6.84% 

-4.01% 

-0.51% 

-0.99% 

-0.32% 

-0.57% 

0.49% 

0.08% 

Government 

0.16% 

-0.36% 

0.77% 

-0.09% 

-0.19% 

0.97% 

0.63% 

0.52% 

0.36% 

0.86% 

0.47% 

-0.14% 

Exports 

-0.33% 

0.80% 

-0.30% 

2.07% 

4.64% 

-8.34% 

-1.95% 

0.17% 

-0.08% 

-0.26% 

0.36% 

0.05% 

Imports 

-0.83% 

-0.99% 

-1.26% 

-3.73% 

-7.89% 

9.87% 

1.90% 

1.26% 

0.15% 

-0.24% 

0.02% 

-0.57% 

Real Final Sales 

-0.02% 

7.98% 

8.90% 

3.44% 

26.95% 

-27.23% 

-4.62% 

2.88% 

3.09% 

3.79% 

1.92% 

0.81% 

 



Summary and Commentary 

 Once again the BEA's antiquated monthly reporting of quarterly data tells us nothing about the economy's most recent full month. In the third decade of the 21st Century the BEA's reporting should be more timely. The current regimen is simply failing to provide guidance for critical fiscal and monetary policies during a time of ongoing economic stress.

 


 
Dick Lepre
 Senior Loan Advisor

 
RPM | MORTGAGE
 3240 Stone Valley Rd West
 Alamo, CA 94507
 Cell: 415.244.9383
 eFax: 866.488.2051
 BRE License # 01143973

NMLS #302379

 Apply online on your computer or Smartphone:

https://applynow.rpm-mtg.com/borrower/signup/dicklepre@rpm-mtg.com

 



 Email: dicklepre@rpm-mtg.com

 

 

LendUS, LLC dba RPM Mortgage NMLS #1938  

Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act 

 

 


Dick Lepre NMLS #302379

LendUS, LLC dba RPM Mortgage - NMLS ID #1938

3240 Stone Valley Road West
Alamo, CA 94507