Consumers Are Shopping at Stores, Not for Homes: February 20 – 24

Consumer spending rebounded in January, as had prices. Here are the five things we learned from U.S. economic data released during the week ending February 24.


Personal spending rose in January…so did inflation. The Bureau of Economic Analysis (BEA) estimates real Personal Consumption Expenditures (PCE) surged 1.1 percent following two successive declines in November and December. Real goods spending swelled 2.8 percent, with gains of +5.5 percent and +1.2 percent for durable and nondurable goods, respectively. Services expenditures gained 1.3 percent. Without inflation adjustments, nominal PCE expanded 1.8 percent, funded by a 0.6 percent increase in nominal personal income and a 2.0 percent bump in nominal disposable income. Real disposable income advanced 1.4 percent. The savings rate continued to build, up 2/10ths of a percentage point to +4.7 percent. Looking at inflation, the PCE price index and the core price measure (which nets out energy and food) each grew 0.6 percent, their largest increases since last June. The former has risen 5.4 percent over the past year, while the latter has a 12-month comparable of +4.7 percent. Each remained well above the Federal Reserve’s two-percent target for inflation. 

A data revision results in a slightly smaller Q4 GDP estimate. The Bureau of Economic Analysis (BEA) reports the Gross Domestic Product (GDP) grew at a seasonally adjusted annualized rate (SAAR) of +2.7 percent during the final three months of 2022. GDP grew 2.1 percent in 2022, down from 2021’s 5.9 percent advance but an improvement from 2020’s 2.8 percent decline. This was down from the BEA’s initial estimate of U.S. economic growth of +2.9 percent. Driving Q4 growth were (in descending order) private companies’ inventory accumulation, personal consumption, net exports, fixed business investment, and federal and state/local government expenditures. The rapidly slowing housing market dragged down GDP. The BEA will once again update its Q4 GDP estimate next month.

Economic activity accelerated in January. The Chicago Fed National Activity Index (CFNAI) surged by 69 basis points to a reading of +0.23. A positive CFNAI reading suggests the U.S. economy expanded above its historical average. Fifty-one of the 85 CFNAI components made positive contributions to the index. Three of four major categories of index components made positive contributions: production/housing (adding 13 basis points to the CFNAI), employment (+0.12), and production (+0.04). Sales/orders/inventories measures cost the index six basis points. The CFNAI’s three-month moving average improved by six basis points to a slow growth reading of -0.26. 

Sales of previously owned homes are on a 12-month losing streak. The National Association of Realtors reports that existing home sales declined 0.7 percent in January to a seasonally adjusted annualized rate (SAAR) of 4.00 million units. Sales were down a startling 36.9 percent from a year earlier. Sales improved in the West (+2.9 percent) and South (+1.1 percent) but slumped in the Midwest (-5.0 percent) and Northeast (-3.8 percent). The count of homes for sale—980,000—represented a 2.1 percent improvement from December, a 15.3 percent jump from a year earlier, and translated into a tight 2.9-month supply. The median sales price of $359,000 was 1.3 percent above January 2022. The press release says sales were “bottoming out.”

Consumer sentiment moderately improved in early February. The University of Michigan’s Index of Consumer Sentiment added 2.1 points to a seasonally adjusted 67.0 (1966Q1=100). A year ago, the measure was at 62.8. The current conditions measure increased by 2.3 points to 70.7 (February 2022: 68.2), while the expectations index grew by 3.0 points to 64.7 (February 2022: 59.4). The press release notes that even after recent improvement, the index remained “almost 20 points below its historical average.” One-year inflation expectations were at +4.1 percent and the long-term expectations were at 2.9 percent. 

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

  • Jobless Claims (Week ending February 18, 2023, First-Time Claims, seasonally adjusted): 192,000, -3,000 vs. the previous week, -5,000 vs. the same week a year earlier). 4-week moving average: 191,250 (-5.8% vs. the same week a year earlier). 
  • New Home Sales (December 2022, New Single-Family Home Sales, seasonally adjusted annualized rate): 670,000 (+7.2% vs. November 2022; -19.4% vs. December 2021). 
  • FOMC Minutes

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

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