Longest U.S. Expansion Keeps Rolling

Third quarter economic growth was just revised upward, and the new monthly personal income figure over the last 12 months, after adjusting for inflation, accelerated sharply. This newly released data confirms that the 10-year-old expansion — already the longest in post-War history — is likely to continue at a modest sustainable pace in the months ahead.

First, let’s look at the upward revision to gross domestic product. These are the four components of economic growth — consumers, business investment, exports net of imports, and state and local government spending. Every quarter, the government issues three estimates of the growth rate. The first estimate, released three weeks ago, was for a third-quarter growth rate of 1.93%. The new figure, 2.13%, is the first in a series of three revised estimates released by the Bureau of Economic Analysis before the final third GDP figure for the quarter ended September 30th, will be released on January 10th. An upward revision of 10% is sizable, and most of it came from growth in the rate of business investment, hinting at a bottom in this key factor in the wealth of the nation. This new data confirmed that U.S. growth is being driven by consumer strength and low inflation.

The other trend confirmed in the latest economic data was that, after adjusting for inflation, real disposable personal income grew by 2.2% in the 12 months ended in October 2019. That ticked down from September’s 12-month rate of growth of 2.6%, but the highs in real disposable personal income per person relative to the two previous expansions are impressive and are the more important way to view the new figures. To be clear, the amount of money the average working American has in their pocket available to spend has not been higher in modern America.

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