After reaching an all-time high in August, the S&P 500® dipped for the second straight month in October – but remained in positive territory year-to-date. The index was down 2.77% in October but was still up 1.21% year-to-date.
Gross domestic product (GDP) growth in the 3rd quarter recovered much of the lost ground from the 2nd quarter, as more businesses returned to operation and pent-up demand from consumers drove strong sales in several key areas.
According to the U.S. Department of Commerce, GDP grew at a record 33.1% annualized rate in the 3rd quarter after sinking 31.4% in the 2nd quarter. For the year, GDP is still down 3.5%.
Consumption of durable goods was up 12.7% from a year earlier in the 3rd quarter, as spending on cars, furniture, and recreational goods and vehicles picked up after slumping in the 2nd quarter. Spending on nondurable goods was up 3.9% from a year earlier, as consumers increased spending at grocery stores in lieu of dining out.
But spending on services remained depressed for the third straight quarter. Services expenditures were down 7.2% in the 3rd quarter versus a year earlier, after being down 14.0% in the 2nd quarter and down 1.1% in the first quarter. The drop in spending was due to a continued lag in the use of transportation services, recreational services, health care, and food services.
Disposable personal income decreased 13.2% in the 3rd quarter, as federal government-funded stimulus pay-outs dried up – after a 2nd quarter increase of 44.3% that was driven by a massive Congressional stimulus package.