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The doomsayers (like me?) have been proved wrong. The consensus is now that is very likely that the US economy would see inflation drop back to pre-pandemic levels without having to go into a slump and so suffer any significant rise in unemployment – in other words, a ‘soft landing’. And assuming that this first estimate of Q3 growth is not significantly reduced in the second estimate in a few weeks, then it seems that the US economy will avoid a slump this year.

But there are some caveats. The headline growth rate of 4.9% is an annualised figure i.e, quarterly real GDP growth in Q3 was actually 1.2% up over Q2, but the US statisticians multiply that by four to get an ‘annualised rate’. No other major economy’s stats are presented in this way. Even so, it is still a relatively strong figure and certainly likely to be faster than any other G7 economy. The rise over Q3 2022 (ie one year ago) was 2.9% – still higher than elsewhere, but not so startling as the annualised figure.

Where is this growth coming from? Most of the faster growth in Q3 came from 1) higher consumer spending on health, utilities and durable goods 1) a rise in stocks of inventories and 3) from a sharp rise in government spending.

American households have continued to spend more. That’s partly because unemployment is low and Americans are getting wages from work. As the inflation rate has fallen back, for the first time in two years, real wages have now started to rise. Americans are also using savings built up during the pandemic lockdowns to sustain spending. But these ‘excess savings’ have now been run down. As a result, households are running up debts (credit cards etc) to sustain spending. So it is unlikely that the US consumer will contribute as much to future US real GDP growth.

Then there are inventories or the stock of unsold goods. In the Q3 growth figure, inventories contributed 1.3% pts of that 4.9% headline rate. That tells you that even though the US consumer is still buying more, unsold sales are building up and companies will have to slow production in future to run down existing stocks. Another large contributor to Q3 growth was government spending and investment, some 0.8% pts of that 4.9%. In previous quarters, this spending increase was for infrastructure. But in Q3, there was a very sharp increase in spending on arms and other military activities.

If we just look at the core drivers of economic growth in a capitalist economy ie consumption and investment, then the annualised growth rate is much less than 4.9% – or 2.5% annualised. Those core drivers did pick up a bit in Q3, but is that likely to continue in Q4 and into 2024? Well, personal consumption growth is likely to slow as ‘excess savings’ disappear and rising interest rates on loans and credit cards force households to reduce borrowing. And that applies even more to business investment, the productive part of investment.

Changes in business investment have always been an indicator of future growth in output and employment – not vice versa, as Keynesians argue. And in Q3, business investment came to a standstill. In previous quarters it was investment in new structures (offices, manufacturing plants etc) that kept business investment contributing about 1% pt to quarterly growth. But in Q3 that has evaporated. Why? Two reasons. First, the profitability of investing in productive sectors of the economy, unless subsidised by government tax handouts etc, is very low. So there is no incentive to invest. And second, rising interest rates caused by the Fed hiking its policy rate, supposedly to control inflation, has increased borrowing costs to levels not seen since the 1970s. Indeed, Goldman Sachs point out that the number of unprofitable firms reached almost 50% of all publicly-listed companies in 2022. The share of business activity that they account for is much smaller, but still an economically meaningful 10% of total business revenues and 13% of capital spending and employment.

So if personal consumption growth is set to slow into 2024 and business investment to fall absolutely, then this Q3 data will be the last good news for the US economy. And as I showed in my September post, A soft landing?, there are other signs of slowdown. Job vacancies are declining; an increase in hours worked by those in work has slowed to a trickle. Most forecasters now expect US GDP growth to fall to an annualised 0.8% next quarter and then down to 0.2% growth in Q1 2024.

Moreover, the consensus may be for a soft landing in the US, but globally that is not so. A reliable high frequency guide to current economic activity is the so-called purchasing managers’ index (PMI) – surveys of companies’ sales, orders and employment. The composite PMI shows the level of activity in both manufacturing and service sectors. Anything above 50 means expansion; anything below means contraction. The latest October PMIs show that the world economy is teetering on recession, with only the US, India, China (and the war economy of Russia) still expanding. Nearly every other major economy is contracting on this measure in October.

The US may have been expanding in Q3, but most of the rest of the world was contracting; and in 2024, they may be joined by the US.

Day 16 of the war

​Key Points

The Gaza Strip

Another six UNRWA staff have been confirmed killed, bringing the total to 35 staff killed since 7 October. Across the Gaza Strip, nearly 600,000 internally displaced people are sheltering in 150 UNRWA facilities[1]. Nearly 420,000 IDPs are sheltering in 93 UNRWA shelters in Middle, Khan Younis and Rafah areas. This represents an increase of 14,000 (3.5 per cent) IDPs in the past 24 hours. A total of 40 UNRWA installations have been damaged since 7 October, including two in the last 24 hours. West Bank

On 22 October 2023, an Israeli Forces airstrike hit al-Ansar Mosque in Jenin Refugee Camp. The mosque is located within the boundaries of the camp. The Palestinian Red Crescent Society (PRCS) reported that two Palestinians were killed in the airstrike, and another three injured. UNRWA staff reported that many families left the Jenin camp, seeking shelter with friends and relatives. UNRWA sanitation services in Jenin Camp were more limited on 22 October. The four UNRWA schools in Jenin (1,700 students) shifted to online learning modality.

Overall Situation

The Gaza Strip

According to the Ministry of Health in Gaza, 4,651 people have been killed since 7 October of those 40 per cent are children, 22 per cent are women and 4 per cent are elderly. Another 14,245 Palestinians were injured. Overall, nearly 1,400 Israelis and foreign nationals have been killed in Israel, according to the Israeli authorities, the vast majority on 7 October (OCHA). On average, the shelters are hosting about 2.57 times their designed capacity. The most crowded shelter, at its most severe level of overcrowding, was hosting 11 times more people than its designed capacity. The West Bank, including East Jerusalem

According to OCHA 91 Palestinians have been killed in the West Bank and 1,734 injured since 7 October. Of these, 31 are Palestine Refugees according to UNRWA.

Humanitarian Access and Protection of Civilians

Gaza

Among those killed are 35 UNRWA colleagues, while another 18 have been injured since 7 October. Shrapnel was found in two UNRWA facilities, including one in the Bureij camp and another in Nuseirat in the Middle area. These fragments resulted from bombardments on areas in close proximity to UNRWA installations on 22 October. In total, 40 UNRWA installations have been damaged since 7 October.

West Bank, including East Jerusalem

Movements of Palestinians in the West Bank, including Palestine Refugees and UNRWA staff, continue to be significantly limited, due to movement restrictions imposed by the Israeli Authorities. Access routes to major cities have been obstructed for vehicles. UNRWA continues to provide services, supported by staff living in close proximity to UNRWA premises and installations.

UNRWA Response

Gaza

UNRWA Shelters

An assessment of the specific needs of persons with disabilities and other vulnerable people in UNRWA shelters is ongoing in cooperation with the INGO Humanity and Inclusion. Since the beginning of the hostilities, about 900 persons with disabilities and other persons with specific needs have been provided with specialized support including dignity kits and assistance devices. To support displaced families and address the problem of bread shortages, UNRWA is supplying local bakeries with flour, to give bread to families at a subsidized rate. UNRWA continues to provide bread provided to the displaced across the UNRWA shelters.

Health

Out of the 22 UNRWA health centres, eight are operational, offering primary healthcare services to refugees. These centres recorded a total of 4,062 visits on 22 October, for refugees and non-refugees. This is around one-third of average daily patient visits before 7 October. Telemedicine services remain unavailable due to communication network issues across the Gaza Strip. Healthcare services were maintained within the shelters, with the support of 89 mobile medical units and medical teams, which attended a total of 9,068 cases at shelters. According to initial health assessments that the UNRWA mobile medical teams conducted with the IDPs in UNRWA shelter, there are over 18,000 persons with non-communicable diseases (NCDs), nearly 3,200 pregnant women and around 320 post-natal cases requiring medical attention. The UNRWA stocks of medicines are critically decreasing with different medicines available for between five to fifteen days.

Sanitation Services/WASH

Some solid waste collection from the camps and emergency shelters and transfer to landfills continues in Middle, Khan Younis and Rafah areas. The scarcity of fuel and staff is impacting solid waste management activities. Water wells in Jabalia, Khan Younis and Rafah are functional, with about 11,000 cubic metres pumped from nine water wells daily. Water trucking operations to the shelters in Rafah and Khan Younis areas continue, but the availability is not enough to meet the needs of the displaced in UNRWA shelters. UNRWA teams are conducting maintenance and rehabilitation at dozens of shelters. These include plumbing, electrical, metal, carpentry works to repair damages and upgrades to support increasing numbers of IDPs. -Ends

Here's what we know as of the end of October 29, 2023:

This afternoon, there was a clash at the Erez checkpoint on the northern borders of the Gaza Strip. Allegedly, Hamas militants attacked IDF soldiers from behind, using underground tunnels. Online, there are photos and videos circulating of Israeli armored vehicles deep inside the enclave's northwestern part. It is still unclear whether this was just another raid or if they managed to establish a foothold there.

Clashes with Hezbollah persist on the border with Lebanon. The group's fighters attacked an IDF stronghold at Mitzgav Am, and as before, the Israeli artillery responded with strikes on the Lebanese border. During one of these exchanges, two UN peacekeepers from Nepal were wounded.

However, the most remarkable event in the context of the conflict has been the protests in the Republic of Dagestan. For the past two days, groups of young men, influenced by channels from the psyops network, have been rallying and searching for Israelis as a sign of "solidarity with the Palestinians." Yesterday, following a leaked channel, they attempted to find Jews at the Flamingo Hotel in Khasavyurt, but they were not present.

Today, the situation escalated further as protests reached Makhachkala airport, where an Israeli plane had landed. The protesters broke through to the runway, damaging the fence and security facility doors. Ultimately, the Israelis were safely relocated, but the rioters began throwing stones at the law enforcement officers who were trying to disperse them.

It remains a mystery how these acts of mob violence are helping the Palestinians. In the meantime, TsIPsOsh channels are inciting residents of the North Caucasus Federal District to intensify their protests.

A Hamas official in Iran, members of Iran’s Islamic Revolutionary Guard Corps, a Gaza-based entity that the US Treasury said has served as a conduit for illicit Iranian funds to Hamas, and the Palestinian Islamic Jihad group are among those targeted in the measures.

The sanctions freeze any US-based assets owned or controlled by the named individuals and organisations. They also block financial transactions with those designated and prohibit the contribution of funds, goods and services to them.

“Today’s action underscores the United States’ commitment to dismantling Hamas’s funding networks by deploying our counterterrorism sanctions authorities and working with our global partners to deny Hamas the ability to exploit the international financial system,” Deputy Treasury Secretary Wally Adeyemo said in a statement.

He added that the US will take action to “further degrade Hamas’s ability to commit horrific terrorist attacks by relentlessly targeting its financial activities and streams of funding”.

Al Jazeera