Sunday, October 31, 2010


By Annaly Capital Management

The first reading of the 3rd quarter of GDP was released this morning, with the right title an estimated 2%. The happy surprise report was personal consumption (PCE), who were better than the expectations of growth of 2.6% calculated on a year.The strength of PCE, who is now effectively to its former peak (in the fourth quarter of 2007), impressionnant.Il seems to ECP as a percentage of GDP continued its rise during this recession, despite turmoil household and millions of jobs lost.

Part of the JCP is non-cyclical, but a portion is purely discretionary. Look at spending on Recreation: it represents only 8.5% of the JCP, yet she represented 30% of the gain in JCP his depressions in mid-2009 and is now 5.3% above the previous record.

It is clear that there are people out spending there are non-discretionary things. This could be linked to the phenomenon of "staycation" on the weak dollar (i.e. persons travelling less overseas, spend more money at home, even if they spend less overall).

However, without governmental assistance, income in support of PCE are still low.Expiry of extended unemployment benefits received some attention in the media recently (see 60 minutes report , and this HuffPo ) even more than 9 million people in regular continuous claims or claims from the scope of emergency, it is clear that an important part of the JCP is the support of the gouvernement.Cela is attested by something interesting that first of all, we had pointed out in March 2010 : for the first time in the history of the series of data, consumption expenditure exceeds income ex-transfert. And the margin more wide. Expiry of unemployment benefits may be difficult to negative shock to the economy endure.


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