Consumer spending remained soft, but sentiment is improving. Here are the five things we learned from U.S. economic data released during the week ending June 30.
Personal spending was flat in May. The Bureau of Economic Analysis reports real Personal Consumption Expenditures (PCE) held steady during the month and has increased only once over the past four months (+0.2 percent in April). Goods spending slumped 0.4 percent (durables: -1.2 percent and nondurables: flat), while services expenditures edged up 0.2 percent. Nominal PCE (net of price changes) inched up 0.1 percent, funded by 0.4 percent rises in nominal personal income and disposable income. Real disposable income grew 0.3 percent. The savings rate added 3/10ths of a point to +4.6 percent. Real PCE has risen 2.1 percent over the past year, half the rate of disposable income’s growth (+4.0 percent). Inflation measures chilled a bit more (but remained above the Federal Reserve’s two-percent target). The PCE price index eked out a 0.1 percent increase in May and was risen 3.8 percent over the past year. The core price measure, which removes food and energy, gained 0.3 percent during the month and 4.6 percent over the past year.
Slowing inflation brightens consumers’ moods. The Conference Board’s Consumer Confidence Index surged 7.2 points to a seasonally adjusted 109.7 (1985=100). This was the index’s highest reading in 18 months. The current conditions index jumped 6.4 points to 155.3, while the expectations index gained 7.8 points to 79.3. The expectations index has failed to top 80—“the level associated with a recession within the next year”—for 16 of the past 17 months. 23.7 percent of survey respondents saw current business conditions as “good” (versus 16.3 percent that said that they were “bad”), while 46.8 percent feel that jobs were “plentiful” (compared to 12.4 percent saying they were “hard to get”). The press also noted inflation expectations fell to their lowest level since December 2020.
Meanwhile, the University of Michigan’s Index of Consumer Sentiment increased 5.2 points to a seasonally adjusted 64.4. A year ago, the index was at 50.0. The current conditions index added 4.1 points to 69.0 (June 2022: 53.8) and the expectations index rose by 6.1 points to 61.5 (June 2022: 47.5). Falling sharply were one-year inflation expectations: down to +3.3 percent from +4.2 percent in May. Consumers anticipate long-term inflation will be at +3.0 percent.
A significant upward revision for Q1 economic growth. The Bureau of Economic Analysis’s third estimate of Q1 Gross Domestic Product (GDP) signals 2.0 percent growth on a seasonally adjusted annualized basis. The prior estimate had the U.S. economy expanding 1.3 percent during the opening months of 2023. The upward revision resulted from higher than previous exports and consumer spending levels. Sectors driving Q1 GDP growth were health care/social assistance, retail, agriculture, accommodation/food services, and information. Corporate prices fell an annualized 4.1 percent during the quarter and were 1.8 percent below Q1 2022 levels.
New home sales continued to rebound in May. New single-family home sales rose 12.2 percent to a seasonally adjusted annualized rate (SAAR) of 763,000. The Census Bureau data series had not been this high since February 2022. Sales gained in all four Census regions month-to-month and three of four regions compared to a year earlier (the West was the exception with a 2.9 percent drop compared to May 2022). There were 428,000 new homes on the market at the end of May (-0.9 percent versus April 2023 and -2.9 percent versus May 2022), the equivalent of a 6.7-month supply. The median sales price of $416,300 was off 7.6 percent from a year ago.
Durable goods orders rose in May. The Census Bureau estimates new orders for manufactured durable goods jumped 1.7 percent to a seasonally adjusted $288.2 billion. Durable goods over the first five months of this year were 3.5 percent ahead of the comparable 2022 months. Transportation goods orders surged 4.8 percent, boosted by jumps for both civilian aircraft and motor vehicles. Net of transportation goods, core orders gained 0.6 percent. Nonaircraft civilian capital goods orders—a proxy for business investment—advanced 0.7 percent. Durable goods shipments also increased 1.7 percent (to $282.7 billion). Core goods shipments gained 0.4 percent. Unfilled orders swelled 0.8 percent to $1.302 trillion, while inventories grew 0.2 percent to $522.9 billion.
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending June 24, 2023, First-Time Claims, seasonally adjusted): 239,000, -26,000 vs. the previous week, +26,000 vs. the same week a year earlier). 4-week moving average: 275,500 (+18.8% vs. the same week a year earlier).
- Pending Home Sales (May 2023, Index (2001=100), seasonally adjusted): 76.5 (-2.7% vs. April 2023; -22.2% vs. May 2022).
- S&P Case-Shiller House Price Index (April 2023, National Index, seasonally adjusted): +0.5% vs. March 2023; -0.2% vs. April 2022.
- FHFA Home Price Index (April 2023, Purchase-Only Index, seasonally adjusted): +0.7% vs. March 2023; +3.1% vs. April 2022.
- Agricultural Prices (May 2023, Prices Received by Farmers, not seasonally adjusted): -2.8% vs. April 2023; -5.6% vs. May 2022.
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What We Learned About the U.S. Economy Last Week 