Data showing a potentially weak economy?

[Josh Sidhu]

This article presents different datapoints and graphs to consider when thinking about the future of the economy.

https://www.biggerpockets.com/blog/gdi-weakness-paints-picture-of-a-weaker-economy-than-we-think?utm_source=Iterable&utm_medium=email&utm_campaign=Newsletter%20%7C%2012/07/23

A couple of the reasons I am a bit more bearish on the future of the economy and the housing market. The main points the article highlights are one the difference in the GDP and GDI numbers and secondly the U.S. personal saving rate and how it correlates to home sales.

GDI has fallen dramatically and is showing a larger spread between GDP. In theory GDP and GDI are supposed to be equal to each other, this discrepancy in numbers could potentially mean a couple of things. Companies are increasing their own profit margins while keeping employee wages relatively the same. It also insinuates weaker job creation and lower wages, as companies have smaller and smaller budgets to provide employees. The positive GDP suggest consumer spending is at a healthy level, the problem with this however is with the lower GDI this isn’t sustainable for long.

The low saving rates corroborates with all of this. The U.S. personal savings rate has been reported at 3.92% (Avg of the last 23 months) meaning after taxes and personal spending people are only saving 3.92% of their income. The last time the rate was below 4% was during the financial crisis of 2008. Consumers are having lower and lower savings, I think even with a drop in interest rates we won’t see as big of a flurry for new home buyers as what some people are claiming.

Sources:

https://apps.bea.gov/iTable/?reqid=19&step=2&isuri=1&categories=survey&_gl=1*1ywdb5a*_ga*NDEzMjU5MjUxLjE3MDMzNjE3MjQ.*_ga_J4698JNNFT*MTcwMzM2MTcyMy4xLjEuMTcwMzM2MTk1My40My4wLjA.#eyJhcHBpZCI6MTksInN0ZXBzIjpbMSwyLDNdLCJkYXRhIjpbWyJjYXRlZ29yaWVzIiwiU3VydmV5Il0sWyJOSVBBX1RhYmxlX0xpc3QiLCIzMTYiXV19

https://apps.bea.gov/iTable/?reqid=19&step=3&isuri=1&1921=survey&1903=76&_gl=1*1g241j8*_ga*NDEzMjU5MjUxLjE3MDMzNjE3MjQ.*_ga_J4698JNNFT*MTcwMzU3MTQwNS4zLjAuMTcwMzU3MTQwNS42MC4wLjA.