Why are the likes of Goldman Sachs chief economist Jan Hatzius predicting no looming recession and better economic growth ahead?
It’s partly because of Bidenomics, the boost to growth that the infusion of $billions into renewal of the US economy in infrastructure, CHIPs manufacturing, and the conversion to more climate friendly policies has jump started.
But it is also because consumers feel prosperous enough to continue to shop and enjoy more leisure activities such as dining out and travel.
The latest indicator of said prosperity is the Institute of Supply Management’s monthly survey of service sector industries that show a continuing expansion rather than contraction of these services, with any number above 50 in its index indicating expansion.
The ISM non-manufacturing Services PMI unexpectedly jumped to 54.5 in August 2023, pointing to the strongest growth in the services sector in six months, compared to 52.7 in July and forecasts of 52.5.
“Thirteen industries reported growth in August’” said Anthony Nieves, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee.. “The Services PMI®, by being above 50 percent for the eighth month after a single month of contraction and a prior 30-month period of expansion, continues to indicate sustained growth for the sector. The composite index has indicated expansion for all but three of the previous 162 months.”
The service sector comprises more than 60 percent of economic activity, and overall consumer spending now almost 70 percent; even more important because of the shrinking industrial sector that Bidenomics is attempting to revive.
And surprise, surprise, Real Estate, Rental & Leasing were the leading service activities, with Accommodation & Food Services next in line. Does it mean the real estate sector (and housing) is recovering and could lead US out of the current malaise?
The construction sector, for instance, continues to expand with a total of 67,000 new construction jobs added in just the past three months.
Bidennomics is also helping decrease the growing income inequality, which has poisoned our politics as well as increased drug use and suicide rates among the working age population.
It’s become so bad that the top 1 percent of income earners corralled 19 percent of incomes earned in 2021, per the NYTimes graph, vs. its low of some 10 percent in the 1970s.
In the words of NYTimes David Leonhardt, “He (Biden) has signed laws (sometimes with bipartisan support) spending billions of dollars on semiconductor factories, roads, bridges and clean energy. He has tried to crack down on monopolies. He has encouraged workers to join unions.”
The ISM non-manufacturing survey reported faster increases were seen in business activity (57.3 vs 57.1), new orders (57.5 vs 55), employment (54.7 vs 50.7) and inventories (57.7 vs 50.4). Also, supplier deliveries increased (48.5 vs 48.1). In the last six months, the average reading of 47.7 percent reflects the fastest supplier delivery performance since June 2009.
This all is a sign that the service sector, comprising more than 60 percent of US economic activity is picking up speed, not slowing down.
Harlan Green © 2023
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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