With consumer spending disappointing in November and durable goods orders soft, GDP growth is expected to end on a quiet note for the year, according to Wells Fargo Securities in a recent economic report. Inflation pressures eased somewhat in December. Based on updated third-quarter GDP data and other indicators, Wells Fargo expects real GDP to expand at a 1.3% annualized rate in the fourth quarter of this year.
Activity in manufacturing is poised to improve in coming years. The factory sector is set to start the new year in expansion territory, a contrast from a year ago, when it was contracting. It should be helped by recovery in the energy sector and improvement in global economic growth, though headwinds may remain from the strong U.S. dollar. Nonmanufacturers are on firmer ground after a rocky 2016.
Durable goods orders fell 4.6% in November due to a drop in civilian aircraft orders. Excluding aircraft and other transportation, new orders rose .5%. Equipment investment may increase in the coming months, due to the fourth-quarter rise of .9% for orders of core capital goods. Current quarter data, however, indicates another soft quarter for equipment investment. Core capital goods shipments remain nearly flat.
Nominal personal spending rose slightly, but, after adjusting for inflation, real spending was up only .1% in each of the last two months. A challenge for consumers is that inflation has picked up while income growth remains slow. Higher prices, however, have not dramatically affected consumer sentiment, Wells Fargo said. Consumer confidence enjoyed a postelection bounce and sits at a post-recession high, which bodes well for economic growth prospects in the 2017.
– Adam Fusco, editorial associate