A Respite From Inflation: May 23 -27

Consumers spent more money on goods and services in April. Here are the five things we learned from U.S. economic data released during the week ending May 27. 


Consumer spending held firm in April, while inflation slowed. Real Personal Consumption Expenditures (PCE) rose 0.7 percent on a seasonally adjusted basis during the month, its biggest advance since January. The Bureau of Economic Analysis measure was 2.8 percent above year-ago levels. Real spending on goods jumped 1.0 percent, split by 2.3 percent and 0.2 percent for durable and nondurable goods, respectively. Services expenditures increased 0.5 percent. Without price adjustments, nominal PCE grew 0.9 percent, outpacing gains for nominal personal income (+0.4 percent) and disposable income (+0.3 percent). As a result, the savings rate fell to a pandemic low of +4.4 percent. The Federal Reserve’s preferred inflation measure, the PCE price index, grew by a relatively modest 0.2 percent in April and was up 6.3 percent over the past year. Net of energy and food, the core PCE price index increased 0.3 percent month-to-month and 4.9 percent year-to-year. 

April featured economic growth. The Chicago Fed National Activity Index (CFNAI) improved by 11 basis points during the month to a reading of +0.47. A reading of 0.00 is indicative of the U.S. economy expanding at its historical rate. Sixty-two of the CFNAI’s 85 components made positive contributions to the index. All four major categories of index components made positive contributions: production (+0.26), employment (+0.10), personal consumption/housing (+0.08), and sales/orders/inventories (+0.04). The CFNAI’s three-month moving average slipped by a basis point to +0.48. 

The U.S. economy and corporate profits contracted in Q1. The second estimate of first-quarter 2022 Gross Domestic Product (GDP) has the U.S. economy shrinking 1.5 percent on a seasonally adjusted annualized rate (SAAR). This latest estimate from the Bureau of Economic Analysis was worse than the previously reported 1.4 percent drop in GDP (the result of smaller than previously believed levels of private sector inventory accumulation and residential fixed investment). Dragging down the economy were (in descending order) trade (and, in particular, imports), the contraction in private company inventories, and government expenditures. The same report has corporate profits shrinking at an annualized 2.3 percent rate during the quarter, although they remained 12.5 percent greater than year-ago levels. 

Americans were pessimistic about business conditions in May. The University of Michigan’s Index of Consumer Sentiment dropped 6.8 points to a seasonally adjusted 58.2 (1966Q1=100). The measure was down 24.5 points from a year earlier as it slumped to its lowest reading since the early days of the Great Recession (November 2008). The current conditions index lost 6.1 points to 63.3in May, while the expectations measure shed 7.3 points to 55.2. The press release linked the recent slump in sentiment to inflation and “continued negative views on current buying conditions for houses and durables.” 

New home sales plummeted in April. Sales of new single-family homes slid 16.6 percent during the month to a seasonally adjusted annualized rate (SAAR) of 591,000 units. The Census Bureau data series is 26.9 percent below year-ago levels. New home sales over the first four months of 2022 were 13.3 percent under their year-ago pace. Sales in all four Census regions on both a month-to-month and year-to-year basis. The number of unsold homes swelled 8.9 percent to 444,000, the equivalent to a 9.0 month supply. The median sales price of $450,600 was up 19.6 percent from a year earlier. 

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

  • Jobless Claims (Week ending May 21, 2022, First-Time Claims, seasonally adjusted): 210,000, -8,000 vs. the previous week, -231,000 vs. the same week a year earlier). 4-week moving average: 206,750 (-56.9% vs. the same week a year earlier). 
  • Durable Goods (April 2022, New Orders for Durable Manufactured Goods, seasonally adjusted): $265.3 billion (+0.4% vs. March 2022). 
  • Pending Home Sales (April 2022, Pending Home Sales Index (2001=100): 99.3 (-3.9% vs. March 2022; -9.1% vs. April 2021). 
  • FOMC Minutes

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

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