Spending and Prices Remain Robust: May 24 – 28

Consumers continue to spend but doing so costs them more. Here are the five things we learned from U.S. economic data released during the week ending May 28.


Personal spending held its own while inflation flared up in April. The Census Bureau reports real Personal Consumption Expenditures (PCE) slipped 0.1 percent on a seasonally adjusted basis during the month. This followed March’s 4.1 percent surge and left spending 8.9 percent ahead of its year-ago pace.  (Note that year-to-year comparisons reflect last April being the trough of the pandemic-triggered recession.). Real spending on goods fell 1.3 percent (after rising 8.9 percent in March), with declines for durables and nondurables of -0.9 percent and -1.6 percent, respectively. Meanwhile, spending on services jumped 0.6 percent, reflecting, in part, the further reopening of restaurants and recreational opportunities. March featured economic stimulus checks to most U.S. households…April did not. As a result, nominal (not inflation-adjusted) personal income fell 13.1 percent, with sharp declines also for nominal (-14.6 percent) and real (-15.1 percent) disposable income. Also plummeting was the savings rate, which nonetheless remained a very swollen +14.9 percent. Inflation continues to build throughout the U.S. economy—the PCE deflator jumped 0.6 percent in April, matching its March increase.  The core PCE deflator, which removes both energy and food, rose 0.7 percent in April after having gained 0.4 percent during the prior month. Over the past year, the PCE deflator has surged 3.6 percent, while the 12-month comparable for the core inflation measure was +3.1 percent. The Federal Reserve a two-percent inflation target.  

Economic expansion moderated in April. The Chicago Fed National Activity Index (CFNAI) lost 147-basis points during the month to a reading of +0.24. The CFNAI is a weighted measure of 85 economic indicators such that an index reading of 0.00 indicates the U.S. economy was expanding at its historical rate. Forty-seven of these indicators made positive contributions to the CFNAI, including three of four major categories: production (+0.18), sales/orders/inventories (+0.07), and employment (+0.05). Indicators tied to personal consumption/housing had a negative -0.06 contribution. The CFNAI’s three-month moving average came in at +0.07, suggesting slightly above-average economic growth

Consumer confidence may be taking a hit from rising inflationary concerns. The Conference Board’s Consumer Confidence Index lost 3/10ths of point in May to a seasonally adjusted 117.2 (1985=100). The current conditions index surged by 12.4 points to a reading of 144.3, while the expectations index lost 8.8 points to a reading of 99.1. 18.7 percent of survey respondents viewed current business conditions as “good,” compared to 21.8 percent that says conditions were “bad.” Just under half (46.8 percent) of consumers said jobs were “plentiful” versus only 12.2 percent that says that they were “hard to get.” While noting that consumers “remain optimistic,” the press release stated that “rising inflation expectations” and “waning further government support” were affecting their optimism.

The University of Michigan’s Index of Consumer Sentiment came at 82.9 (1966Q1=100), off 5.4 points from April but up 1/10th of a point from the preliminary May reading reported a few weeks ago. The current conditions index shed 7.8 points during the month to a reading of 89.4 while the expectations measure decreased by 3.9 points to 78.8. All three measures remained well above their year-ago marks. The press release notes that “consumers reported higher prices across a wide range of discretionary purchases, including homes, vehicles, and household durables.”

New home sales declined in April. The Census Bureau indicates that sales of new single-family homes slowed 5.9 percent to a seasonally adjusted annual rate of 863,000. Even with the decline, sales were up 48.3 percent from April 2020. Sales improved during the month by 7.9 percent in the West but fell in the Northeast (-13.7 percent), Midwest (-8.3 percent), and South (-8.2 percent). There were 316,000 new homes available for sale at the end of the month, up 3.9 percent for the month but 1.6 percent under year-ago levels and the equivalent to a tight 4.4 month supply. The median sales price for new homes was $372,400, up 20.1 percent from a year earlier.  

Orders for durable goods—except for automobiles—rose in April. The Census Bureau places the seasonally adjusted value of durable goods orders at $246.2 billion, down 1.3 percent for the month. Transportation goods orders fell 6.2 percent, pulled down by a 6.2 percent decline for automobiles and an 8.5 drop for defense aircraft. Net of transportation goods, durable goods orders gained 1.0 percent. Rising were orders for primary metals (+3.0 percent), machinery +1.4 percent), fabricated metal products (+0.9 percent), and computers/electronics (+0.4 percent). Civilian, nonaircraft capital goods orders—a proxy for business investment—inched up 0.2 percent.

Other U.S. economic data released over the past week:

  • Jobless Claims (Week ending May 22, First-Time Claims, seasonally adjusted): 406,000, -38,000 vs. the previous week, -1,481,000 vs. the same week a year earlier). 4-week moving average: 458,750 (-79.9% vs. the same week a year earlier).
  • Gross Domestic Product (2021Q1-2nd Estimate, Real GDP, seasonally adjusted annualized rate): +6.4% vs. 2020Q4.
  • Pending Home Sales (April 2021, Index (2001=100), seasonally adjusted): 106.2 (March 2021: 111.1, April 2020: 70.0).
  • FHFA House Price Index (March 2021, Purchase-Only Index, seasonally adjusted): +1.4% vs. February 2021, +13.9% vs. March 2020.
  • Case Shiller Home Price Index (March 2021, 20-City Index, seasonally adjusted): +1.6% vs. February 2021, +13.3% vs. March 2020.
  • Agricultural Prices (April 2021, Prices Received by Farmers): +6.9% vs. April 2021, +28.3% vs. May 2020.

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

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