- Today's Scoop:
Hey friend - thanks for reading. It’s getting cold outside, but your scoops are coming in hot!
Here’s what you need to know today…
The economy was booming last quarter.
Policymakers think things are slowing considerably now.
Europe’s picking on American whiskey.
The Market: ⬇️ -0.1%
S&P 500: 4,550.58
1Mo: +9% | 1Yr: +12% | 5Yr: +65%
The market wafted sideways again today as investors waited for more substantial news. The most crucial thing will continue to be inflation data. Policymakers’ preferred inflation gauge will be released tomorrow.
The US economy was booming last quarter, even more than economists initially reported. The Commerce Department’s updated estimate of third-quarter GDP rose to a 5.2% annualized rate, revised up from 4.9%. [🤓] While consumer spending was adjusted down, business investment and state and local government spending increased, driving the most robust growth in two years. It was one of the best quarters for the economy of the entire decade.
Policymakers think the economy has cooled down since the end of last quarter. The Federal Reserve's Beige Book survey indicated that economic activity in the country has slowed in recent weeks, with consumers becoming more price-sensitive and dialing back spending on non-essential and big-ticket items. Companies aren’t looking for as many workers. Banks say people are mostly in solid financial health and have only just begun falling behind on debt payments.
Europe and the US are fighting over trade taxes, and whiskey is in the middle. American whiskey makers, including small craft distilleries, face the threat of a 50% tax on their sales to Europe starting in 2024. The tariff is the European Union's answer to US tariffs on European steel and aluminum, which were imposed in 2018. While US and EU officials hope to reach a deal by year-end to avoid the surcharge, the broader trade dispute remains ongoing. This has created uncertainty for distillers who need to plan years in advance due to the aging process of their products.
How are you feeling about the economy?
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What exactly is GDP, and why should I care?
Gross Domestic Product (GDP) is how we track how much stuff the economy is producing. The actual number (~$28 trillion) doesn't matter as much as the direction and magnitude. We track the growth rate of real GDP (inflation-adjusted) to know whether the economy is expanding or contracting from the previous quarter.
The reporting style can be a bit confusing. The main number you hear will be an annualized growth rate (+5.2%), representing how much the GDP would increase/decrease if the economy hypothetically grew at that rate for an entire year. It's different from how much our production increased/decreased quarter-to-quarter (+1.3%) and not representative of the growth/decline over the past year (+3.0%). Annualizing the past quarter’s change makes the backward-looking number a little more forward-looking.