A Bounce Back? October 24 – 28

The U.S. economy expanded during Q3. Here are the five things we learned from U.S. economic data released during the week ending October 28. 


Personal spending held resilient in September, but so did inflation. Real Personal Consumption Expenditures (PCE) rose a seasonally adjusted 0.3 percent, matching the Bureau of Economic Analysis’s measure gain in August. Real spending on goods grew 0.4 percent (durable goods: +0.1 percent; nondurables: +0.6 percent) and that for services gained 0.3 percent. Without adjustments for inflation, nominal PCE rose 0.6 percent (also matching its August gain), funded by 0.4 percent gains for nominal personal and disposable income. Real disposable income held steady in September. The savings rate fell by 3/10ths of a percentage point to +3.1 percent (just above its pandemic-low of +3.0 percent). Over the past year, real PCE has risen 1.9 percent even as real disposable income fell 2.9 percent. The Federal Reserve’s preferred measures of inflation, the PCE price index and core price index increased 0.3 percent and 0.5 percent, respectively. Over the past year, the PCE price index has jumped 6.2 percent, while core prices (net of energy and food) surged 5.1 percent. The Federal Reserve target for the latter is +2.0 percent. 

Reversing course, the U.S. economy expanded during the summer. The Bureau of Economic Analysis’s first estimate for third-quarter Gross Domestic Product (GDP) has the economy growing 2.6 percent on a seasonally adjusted annualized basis. The increase followed two quarterly contractions of -1.6 percent and -0.6 percent, respectively. Trade was the most significant contributor to Q3 growth, with exports and imports adding 163 and 114 basis points, respectively. Also boosting economic activity were consumption (+97 basis points, all coming from spending on services), nonresidential fixed investment (+49 basis points), federal government expenditures (+23 basis points), and state/local government spending (+19 basis points). Drags on the economy included fixed residential investment (-137 basis points) and the change in private inventories (-70 basis points). The BEA will revise its Q3 GDP estimate twice over the next two months. 

Economic growth was solid in September. The Chicago Fed National Activity Index (CFNAI) held steady at a reading of +0.10. A CFNAI reading above zero indicates the U.S. economy is growing above its historical average. Forty-eight of the 85 CFNAI components made positive contributions to the index. Among four major categories of components, positive contributions came from those related to production (+0.07) and employment (+0.06). Components covering sales/orders/inventories (-0.01) and consumption/housing (-0.01) each made small negative contributions. The CFNAI’s three-month moving average improved by 13 basis points to +0.17. 

There was no progress with consumer sentiment in October. The Conference Board’s Consumer Confidence Index lost 5.3 points to a seasonally adjusted 102.5 (1985=100). The index declined after two consecutive increases and was below the year-ago reading of 111.6. The current conditions index plummeted 11.3 points to 138.9, while the expectations index edged down 1.4 points to 78.1. Only 17.1 percent of survey respondents believed that current economic conditions were “good” (versus 24.0 percent that viewed them as “bad”). 45.2 percent of consumers indicated that jobs were “plentiful,” while 12.7 percent said they were “hard to find.” The press release noted that “concerns about inflation—which had been receding since July—picked up again.”

Meanwhile, the University of Michigan’s Index of Consumer Sentiment added 1.3 points to a seasonally adjusted 59.9 (1966Q1=100). The index was below its year-ago reading of 71.7 and has been below 60.0 for seven of the past eight months. The current conditions index added 5.9 points to 65.6 (October 2021: 77.7) and the expectations index slipped 1.8 points to 56.2 (October 2021: 67.9). Short-term inflation expectations jumped back to 5.0 percent, while long-run inflation expectations bounced back to 2.9 percent. The press release noted that “inflation expectations are likely to remain unstable in the months ahead.”

Transportation drives a rise in durable goods orders. New orders for manufactured goods increased 0.4 percent to a seasonally adjusted $274.7 billion. The Census Bureau data series has advanced in six of the past seven months. Civilian aircraft and motor vehicles pushed up transportation goods orders 2.1 percent. Non-transportation goods orders slowed 0.5 percent. Civilian nonaircraft capital goods orders—a proxy for business investment—slumped 0.7 percent. Durable goods shipments grew 0.3 percent to $274.2 billion. Unfilled durable goods orders swelled 0.5 percent to $1.138 trillion, while inventories expanded 0.2 percent to $488.7 billion. 

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

  • Jobless Claims (Week ending October 22, 2022, First-Time Claims, seasonally adjusted): 217,000, +3,000 vs. the previous week, -77,000 vs. the same week a year earlier). 4-week moving average: 219,000 (-30.5% vs. the same week a year earlier). 
  • New Home Sales (September 2022, New Single-Family Sales, seasonally adjusted annualized rate): 603,000 (-10.9% vs. August 2022; -17.6% vs. September 2021).
  • Pending Home Sales (September 2022, Index (2001=100), seasonally adjusted): 79.5 (-10.2% vs. August 2022; -31.0% vs. September 2021). 
  • FHFA House Price Index (August 2022, Purchase-Only Index, seasonally adjusted): -0.7% vs. July 2022; +11.9% vs. August 2021. 
  • Case-Shiller Home Price Index (August 2022, National Index, seasonally adjusted): -0.9% vs. July 2022; +13.0% vs. August 2021).

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

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