US GDP confirmed the great summer experienced by American households with an increase of 4.9%, the best quarter in two years. Consumption increased 4% on an annual basis, driven by services. Among the most striking effects are the mass phenomena created by the tours of Taylor Swift and Beyoncé, as well as the huge success of films such as Barbie and Oppenheimer.
These three events alone are estimated to have contributed 0.5 percentage points to growth this quarter. The worldwide gross of both films is $2.4 billion and Swift’s show is expected to generate $5 billion from tickets, accommodations and product sales. For example, the average fan spends $1,300 attending concerts, especially due to high resale prices. These signs point to a strong consumer, driven by savings accumulated after the pandemic. Likewise, lower household debt plays an important role – 72% of GDP, a far cry from 97% in 2009 – and an owner with a mortgage that is less sensitive to rising interest rates, as about 86% of the mortgage stock in the US at a fixed price.
However, from now on it will be more difficult. On the one hand, consumers’ financial capacity is being constrained – the extraordinary student loan shortage ended in September – and savings accumulated after the pandemic are on the verge of being wiped out. On the other hand, business investment was negative this quarter (-0.1%), indicating greater caution on the part of managers. Finally, real estate investment, which has improved this quarter (3.9%), faces mortgage interest rates of 8% in the following periods, the highest in 20 years, which will undermine its development.
On the positive side, growth sluggishness may carry over into the coming quarters and maintain the economy’s current resilience. In addition, the consumer is benefiting from wage growth above inflation (4.2% versus 3.7%) and near-trough unemployment (3.8%). That optimism has led to big falls in bonds, which have fallen 4% since August. If the year were to end like this, it would be the first time that this asset has recorded three consecutive years of losses.
The North American economy is approaching winter without the glory of its two stars, who have already completed much of their American tour. And all this in an environment in which the financial capacity of the consumer is weakened. This normalization of growth and falling inflation will be favorable factors for fixed income, allowing us to put behind us a cruel summer for bonds that, since the good news for the economy, has had the same sentimental ambiguity as the Taylor Swift song has experienced a period of uncertainty for fixed income investors.
Luis Fernando Coello, analyst at Banca March.
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