A Big Miss: April 25 – 29

Trade slams Q1 economic growth. Here are the five things we learned from U.S. economic data released during the week ending April 29. 


The U.S. economy contracted in Q1. The Bureau of Economic Analysis estimates real Gross Domestic Product (GDP) shrank 1.4 percent on a seasonally adjusted annualized basis, following a 6.9 percent jump during the final three months of 2021. GDP had not fallen since the early months of the pandemic in Q2 2020. Weighing on the economy were declines in private inventory investment (particularly for motor vehicles and in retail), exports, government spending, and a rise in imports. The record trade deficit single-handedly was responsible for removing 320-basis points from Q1 GDP growth. But this report does not—by itself—suggest a U.S. economy that is falling into a recession. Consumer spending and fixed investment (both residential and business) made robust contributions to the economy. In fact, consumption increased at nearly the same rate as in Q4 2021. The BEA will revise its GDP estimate twice over the coming two months. 

Inflation devoured most of March’s consumer spending gain. The Census Bureau reports real personal consumption expenditures (PCE) increased by a seasonally adjusted 0.2 percent during the month, up from a 0.1 percent gain in February. Spending on goods fell for the fourth time in five months (-0.5 percent), split by declines for durable and nondurable goods of -0.9 percent and -0.3 percent, respectively. Services expenditures grew 0.6 percent. Without inflation adjustments, nominal PCE surged 1.1 percent, supported (in part) by half percentage gains for nominal personal income and disposable income. Real disposable income, however, decreased 0.4 percent. The savings rate dropped 6/10ths of a percentage point to a pandemic-low of +6.2 percent. Prices continued to surge—the PCE price index rose 0.9 percent in March and has risen 6.6 percent over the past year (a 40-year high). Netting out both energy and food, the core PCE price index gained 0.3 percent during the month and was up 5.2 percent. 

Economic growth slowed in March. The Chicago Fed National Activity Index (CFNAI) declined by ten basis points to a reading of +0.44. While the index was at its lowest point since last December, the reading suggests an economy growing above its historical average. Fifty-nine of the CFNAI’s 85 components made positive contributions to the index. Three of the four major categories components made positive contributions: production (adding 27-basis points of growth), employment (+0.16), and sales/orders/inventories (+0.06). Personal consumption/housing components were a four-basis point drag.  

April featured mixed signals on consumer sentiment. The Conference Board’s Consumer Confident Index edged down 3/10ths of a point to a reading of 107.3 (1985=100). A year earlier, the same measure was at 117.5. The current conditions index shed 1.2 points to 152.6, while the expectations index added a half-point to 77.2. 20.8 percent of survey respondents said business conditions were good, slightly below the 21.9 percent that saw them as “bad.” More than half of consumers indicated that jobs were “plentiful,” five times as many people (10.6 percent) who said that they were “hard to get.” The press release said that inflation and the Russian invasion of Ukraine “will continue to pose downside risks to confidence.”

Meanwhile, the University of Michigan’s Index of Consumer Sentiment added 5.8 points to a seasonally adjusted 65.2 (1966Q1=100), its highest reading since January. Rising were indices for current conditions (+2.2 points to 69.4) and expectations (+8.2 points to 62.5). The press release warns that the Fed’s moves to raise interest rates “now aims at tempering the strong labor market and trimming wage gains, the only factors that now support optimism.”

Durable goods orders rose in March. New orders for manufactured durable goods jumped 0.8 percent during the month to a seasonally adjusted $275.0 billion. The Census Bureau measure for the first three months this year was 12.6 percent ahead of the first three months in 2021. Rising were new orders for electrical equipment/appliances (+3.9 percent), computers/electronics (+2.6 percent), primary metals (+1.5 percent), fabricated metal products (+0.8 percent), machinery (+0.7 percent), and transportation goods (+0.2 percent). Durable goods shipments jumped 1.2 percent to $274.2 billion, with shipments over the first three months of the year 11.2 percent above year-ago levels. Also growing in March were unfilled orders (+0.4 percent to $1.295 trillion) and inventories (+0.7 percent to $482.9 billion).

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

  • Jobless Claims (Week ending April 23, 2022, First-Time Claims, seasonally adjusted): 180,000, -5,000 vs. the previous week, -394,000 vs. the same week a year earlier). 4-week moving average: 179,750 (-69.4% vs. the same week a year earlier). 
  • New Home Sales (March 2022, New Single-Family Home Sales, seasonally adjusted annualized rate): 763,000 (-8.6% vs. February 2022; -12.6% vs. March 2021).
  • Pending Home Sales (March 2022, Pending Home Sales Index (2001=100), seasonally adjusted) 103.7 (-1.2% vs. February 2022; -8.2% vs. March 2021).
  • FHFA House Price Index (February 2022, Purchase-Only Index, seasonally adjusted): +2.1% vs. January 2022; +19.4% vs. February 2021).
  • S&P Case-Shiller Home Price Index (February 2022, National Index, seasonally adjusted): +1.9% vs. January 2022; +19.8% vs. February 2021).
  • Agricultural Prices (March 2022, Prices Received by Farmers, not seasonally adjusted): +6.3% vs. February 2022; +30.6% vs. March 2021.

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

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