"Meanwhile, third-quarter growth is shaping up to be hotter. Durable goods orders for August jumped more than expected, according to data released on Thursday. And the personal income and spending report on Friday showed consumption remained healthy in August while also topping forecasts. Given that consumer spending represents over two-thirds of the U.S. economy, the gains more than offset weakness in housing, which remains buffeted by high home prices and mortgage rates."
"Stephen Brown, deputy chief North America economist at Capital Economics, said in a note on Friday that the income and spending data should further ease fears that the U.S. is on the cusp of a sharp slowdown. He also noted that discretionary spending, which typically is cut when consumers are suffering, drove growth. And while gains in spending have outpaced income for the last three months, the August savings rate was still at a relatively high 4.6%, meaning consumers are not yet overextended."
Second-quarter U.S. GDP was revised up to 3.8% from 3.3% on robust consumer spending after a first-quarter dip tied to the trade war. Early third-quarter indicators point to stronger momentum as durable-goods orders for August jumped and personal income and spending topped forecasts. Consumer spending, which comprises over two-thirds of GDP, offset housing weakness caused by elevated home prices and mortgage rates. The Atlanta Fed now tracks third-quarter growth at 3.9%. Discretionary spending led recent gains, the August savings rate remained about 4.6%, and Capital Economics projects third-quarter GDP could reach roughly 4%.
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