Consumers Check Their Spending: November 25 – 29

Personal spending and overall economic activity chilled in the fall weather. Here are the five things we learned from U.S. economic data released during the week ending November 29.

#1Personal spending reflected caution in October. The Bureau of Economic Analysis indicates real personal consumption expenditures (PCE) increased 0.1 percent on a seasonally adjusted basis during the month, its smallest increase since February. Real spending on goods slumped 0.2 percent, pulled down by a 0.8 percent drop for durable goods. Expenditures on both nondurable goods and services each grew 0.2 percent. Nominal (not inflation-adjusted) PCE rose 0.3 percent, even as nominal personal income held steady and nominal personal income slipped 0.1 percent. Real disposable income dropped 0.3 percent. As a result, the savings rate shed 3/10ths of a point to +7.8 percent, its lowest point since July. Over the past year, real PCE has risen 2.3 percent, while real disposable income has grown 2.8 percent.Real Personal Consumption Expenditures: January - October 2019

#2The U.S. economy grew more robustly in Q3 than previously thought. The Bureau of Economic Analysis’ second estimate of Q3 Gross Domestic Product (GDP) now places the quarter’s economic expansion at a seasonally adjusted annualized rate (SAAR) +2.1 percent, up from the previously reported 1.9 percent gain. The upward revision was due to higher than previously reported levels of private inventory accumulation, business investment, and personal spending. Of the major components of the economy, only those tied to personal spending, government spending, fixed residential investment, and private inventory accumulation led to GDP growth. The same report finds Q3 corporate profits were soft, edging up by a mere 0.2 percent during the quarter and off 0.8 percent from a year earlier. The BEA will update its Q3 GDP and corporate profits data once again on December 20. 

#3…But the rate of economic expansion appears to have decelerated sharply in October. The Chicago Fed National Activity Index (CFNAI), a weighted index of 85 economic data points, lost 36-basis points during the month to a reading of -0.71. The CFNAI’s three-month moving average, which removes some of the month-to-month volatility, fell to its lowest mark since May with a ten-basis point loss to -0.31. The negative reading does not imply the U.S. economy contracted during the month, however, as the moving average remained above -0.70 (the marker for negative growth). Still, only 27 of the 85 economic indicators made a positive contribution to the CFNAI, while the other 58 measures had a negative impact. Indicators linked to production and employment had the most substantial negative impact on the CFNAI in October.

#4Durable goods orders showed some life in October. The Census Bureau estimates new orders for manufactured durable goods grew 0.6 percent during the month to a seasonally adjusted $248.7 billion. Transportation goods orders rose 0.7 percent, boosted by increases for both defense (+18.1 percent) and civilian (+10.7 percent) aircraft. Net of transportation goods, core durable goods orders gained 0.6 percent. Rising were orders for fabricated metal products (+1.8 percent), machinery (+1.3 percent), and computers/electronics (+0.7 percent). Orders slowed for electrical equipment/appliances (-1.7 percent) and primary metals (-1.4 percent). Signaling some vigor was business investment as civilian capital goods orders net of aircraft grew 1.2 percent in October.

#5New home sales slipped in October. The Census Bureau reports sales of new single-family homes decreased 0.7 percent during the month to a seasonally adjusted annualized rate of 733,000 units. Even with the decline, new home sales were 31.6 percent ahead of their year-ago pace. Sales grew during the month in two Census regions—West (+7.1 percent) and Midwest (+4.2 percent)—but slowed in the Northeast (-18.2 percent) and South (-3.3 percent). There were 322,000 new homes available for sale at the end of the month, up a modest 0.3 percent from September but off 3.3 percent from a year earlier. This was equivalent to a 5.3 month supply of homes on the market (versus a 7.2 month supply a year earlier).

Other U.S. economic data released over the past week:
Jobless Claims (week ending November 23, 2019, First-Time Claims, seasonally adjusted): 213,000 (-15,000 vs. previous week; -21,000 vs. the same week a year earlier). 4-week moving average: 219,750 (-2.1% vs. the same week a year earlier).
Consumer Confidence Index (November 2019, Index (1985=100), seasonally adjusted): 125.5 (vs. October 2019: 126.1).
Pending Home Sales (October 2019, Index (2001=100), seasonally adjusted): 106.7 (vs. September 2019: 108.6; vs. October 2018: 102.2).
FHFA House Price Index (September 2019, Purchase-Only Index, seasonally adjusted): +0.6% vs. August 2019, +5.1% vs. September 2018.
Agricultural Prices (October 2019, Prices Received by Farmers): -2.6% vs. September 2019, -0.6% vs. October 2018.
Beige Book

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

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