October featured another sign that inflation has been cooling off. Here are the five things we learned from U.S. economic data released during the week ending December 1.
Consumer spending and inflation decelerated in October. The Bureau of Economic Analysis estimates real Personal Consumption Expenditures (PCE) increased by a seasonally adjusted 0.2 percent. This followed September’s 0.3 percent gain. Real spending on goods inched up 0.1 percent, split between a 0.3 percent drop for durables and a 0.3 percent gain for nondurables. Services expenditures rose 0.2 percent. Without adjustments for inflation, nominal PCE grew 0.2 percent, funded by increases in nominal personal income and disposable income of 0.2 percent and 0.3 percent, respectively. Real disposable income grew 0.3 percent. The savings rate eked out a 1/10th percentage point gain to +3.8 percent. The same report notes the Federal Reserve’s closely watched inflation measure (the PCE price index) was unchanged in October and up 3.0 percent over the past year. Removing food and energy, the core PCE price index jumped 0.2 percent in October and has swelled 3.5 percent over the past year. Both 12-month comparables were above the Fed’s two-percent inflation target but also reflected inflation slowing relative to the past two years.
Q3 economic growth was better than previously thought. Real Gross Domestic Product (GDP) swelled 5.2 percent on a seasonally adjusted annualized basis. The Bureau of Economic Analysis previously estimated Q3 growth at 4.9 percent. The upward revision resulted from higher estimates for nonresidential fixed investment and state & local government expenditures. Positive contributions to GDP growth came from (in descending order) personal consumption, the change in private inventories, government expenditures, exports, nonresidential investment, and residential investment. The same report finds corporate profits rising an annualized 3.3 percent during the quarter but remaining 0.7 percent under year-ago levels. The BEA will update its Q3 GDP and corporate profit estimates in late December.
Manufacturing contracted in November. The Institute for Supply Management’s Manufacturing PMI held steady at 46.7. The index has remained below 50.0—the threshold between an expanding and contracting manufacturing sector—for 13 months. Measures for new orders, inventories, production, and employment remained below 50.0, but the first two improved from October. Only three of 18 tracked manufacturing sectors expanded during the month: food/beverage, nonmetallic mineral products, and transportation equipment. The press release said, “[d]emand remains soft and production execution was slightly down.”
New home sales slumped in October. The Census Bureau reports new single-family home sales declined 5.6 percent to a seasonally adjusted annualized rate (SAAR) of 679,000 units. Even with the decline, sales were 17.7 percent above year-ago levels. During October, sales fell sharply in the West and Midwest but grew in the Northeast and South. Sales were up versus October 2022 in all four Census regions. Inventories of unsold new homes increased 1.4 percent to 439,000 (-5.8 percent versus October 2022), the equivalent to a 7.8 month supply. New homes were cheaper as the median sales price of $409,300 was off 17.6 percent from a year earlier.
Consumer confidence stabilized in November. The Conference Board’s Consumer Confidence Index added 2.9 points to a seasonally adjusted 102.0 (1985=100), its first gain in four months. A year ago, the index was at 101.4. The current conditions index slipped 4/10ths of a point to 102.0. The expectations index jumped 5.1 points to 72.7. One in five survey respondents view current business conditions as “good,” with a similar percentage saying they were “bad.” Nearly two in five consumers said jobs were plentiful,” whereas 15.4 percent indicated they were “hard to get.” Two-thirds of Americans said that a recession was “somewhat” or “very likely” to happen soon.
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending November 25, 2023, First-Time Claims, seasonally adjusted): 218,000, +7,000 vs. the previous week, -5,000 vs. the same week a year earlier). 4-week moving average: 220,000 (+3.5% vs. the same week a year earlier).
- Construction Spending (October 2023, Value of Construction Put in Place, seasonally adjusted annualized rate): $2.027 trillion (+0.6% vs. September 2023; +10.7% vs. October 2022).
- Housing Market Index (November 2023, Index (>50 = More Homebuilders View Housing Market as “Good” than “Bad,” seasonally adjusted): 34 (October 2023: 40; November 2022: 33).
- S&P Case-Shiller Home Price Index (September 2023, National Index, seasonally adjusted): +0.8% vs. August 2023; +3.9% vs. September 2022.
- FHFA House Price Index (September 2023, Purchase-Only Index, seasonally adjusted): +0.6% vs. August 2023; +6.1% vs. September 2022).
- Agricultural Prices (October 2023, Prices Received by Farmers, not seasonally adjusted): -6.3% vs. September 2023; -11.0% vs. October 2022.
- Beige Book
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What We Learned About the U.S. Economy Last Week 