It’s Still Growth: April 24 – 28

The U.S. economy expanded at a slower pace in early 2023. Here are the five things we learned from U.S. economic data released during the week ending April 28

Q1 GDP growth was feeble. The U.S. economy expanded at a seasonally adjusted annualized rate (SAAR) of 1.1 percent during the first three months of 2023. The Bureau of Economic Analysis measure had increased at an annualized 3.2 percent and 2.6 percent during the final two quarters of 2022. Consumer spending, government spending, exports, and business investment drove Q1 economic growth. Perhaps a sign that things are not particularly dire is that a sharp reduction in private inventories weighed heavily on GDP–companies presumably will need to increase spending in the near-term to replenish inventories. Also slowing economic activity was continued housing market weakness. The BEA will update its Q1 GDP estimate twice over the next two months.

Personal spending was weak as inflation mellowed further in March. The Bureau of Economic Analysis reports that real Personal Consumption Expenditures (PCE) held steady on a seasonally adjusted basis, after falling 0.2 percent in February and rising 1.4 percent in January. Real spending on goods fell 0.4 percent (durables: -0.8 percent; nondurables: -0.1 percent), while services expenditures swelled 0.4 percent. Without price adjustments, nominal PCE also held steady, even as nominal personal and disposable income grew 0.3 percent and 0.4 percent, respectively. Real disposable income rose 0.3 percent. The savings rate continued its recent ascent, adding 3/10^ths of a percentage point to +5.1 percent. Over the past year, real personal spending has gained 1.9 percent as disposable income has risen 4.0 percent. The same report features the Federal Reserve’s preferred inflation measures: the PCE price index and the core PCE price index (which nets out energy and food). The former was up 0.1 percent for the month as the latter gained 0.3 percent. Over the past year, the PCE price index has gained 4.2 percent, while the core measure has risen 4.6 percent. The Fed’s target is two percent.

Economic activity was slow in March. The Chicago Fed National Activity Index (CFNAI) held steady at a reading of -0.19. A reading below zero is indicative of the economy growing below its historical average. Forty-three of the 85 economic measures that comprise of the CFNAI made positive contributions to the index. The other 42 measures made negative contributions. Among the four major categories of economic measures, three negatively contributed to the index production, sales/orders/inventories, and consumption/housing. Employment-related measure made a small positive contribution. The CFNAI’s three-month moving average improved by 10 basis points to +0.01.

Consumer sentiment was muddled in April. The Conference Board’s Consumer Confidence Index lost 2.7 points to a seasonally adjusted 101.3 (1985=100). A year earlier, the index was at 108.6. The current conditions improved by 2.2 points to 151.9 and yet the expectations index plummeted by 5.9 points to 68.1 The expectations measure has been under 80—typically indicative of a pending recession—for 14 of the past 15 months. Nearly matching percentage of survey respondents viewed present business conditions as “good” (18.8 percent) and “bad (18.1 percent). This was even though nearly half of consumers said jobs were “plentiful” (48.4 percent), compared to 11.1 percent saying they were “hard to get.” 

Meanwhile, the University of Michigan’s Index of Consumer Sentiment added 1.5 points to a seasonally adjusted 63.5 (1966Q1=100). The index was at 65.2 a year earlier. The current conditions index added 1.9 points to 68.2 (May 2022: 69.4), while the expectations index increased by 1.3 points to 60.5 (April 2022: 62.5). The press release noted a “worsening assessment of personal finance” caused by inflation.

New home sales rebounded in March. New single-family home sales rose 9.6 percent to a seasonally adjusted annualized rate of 683,000. The Census Bureau data series was 3.4 percent below year-ago levels. Sales improved during the month in three of four Census regions, with the South being the exception. There were 432,000 new homes available for sale (-0.5 percent versus February 2023 and +5.1 percent versus March 2022), the equivalent to a 7.6 month supply. The median sales price of $449,800 was up 3.2 percent from a year earlier.

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

• Jobless Claims (Week ending April 22, 2023, First-Time Claims, seasonally adjusted): 230,000, -16,000 vs. the previous week, +23,000 vs. the same week a year earlier). 4-week moving average: 236,000 (+9.8% vs. the same week a year earlier). 
• Durable Goods (March 2023, New Orders for Manufactured Durable Goods, seasonally adjusted): $276.4 billion (+3.2% vs. February 2023).
• Pending Home Sales (March 2023, Index (2001=100), seasonally adjusted): 78.9 (-5.2% vs. February 2023; -23.2% vs. March 2022).
• FHFA House Price Index (February 2023, Purchase-Only Index, seasonally adjusted): +0.5% vs. January 2023; +4.0% vs. February 2022.
• S&P/Case-Shiller Home Price Index (February 2023, National Index, seasonally adjusted): -0.2%. vs. January 2023; +2.0% vs. February 2022.
• Agricultural Prices (March 2023, Prices Received by Farmers, not seasonally adjusted): +1.3% vs. February 2023; +1.0% vs. March. 2022.

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