Consumers spent money and prices mellowed in November. Here are the five things we learned from U.S. economic data released during the week ending December 22.
Personal spending rose as prices declined in November. Real Personal Consumption Expenditures (PCE) increased a seasonally adjusted 0.3 percent, up from October’s 0.1 percent gain. Goods spending advanced 0.5 percent, with durable and nondurable goods increasing 0.9 percent and 0.3 percent, respectively. Services expenditures were up 0.2 percent. Without inflation adjustments, nominal PCE was up 0.2 percent in November, funded by 0.4 percent gains in both nominal personal income and disposable income. Real disposable income also rose 0.4 percent. The savings rate inched up 1/10th of a percentage point to +4.1 percent. Over the past year, real PCE has increased 2.7 percent, supported by a 4.1 percent gain in real disposable income. The same Bureau of Economic Analysis report has the Federal Reserve’s preferred inflation measure—the PCE Price Index—slipping 0.1 percent. Removing energy and food, the core PCE Price Index inched up a modest 0.1 percent. The PCE Price index was up 2.6 percent over the past year, while the core measure gained 3.4 percent. Both remained above the Fed’s two-percent inflation target.
As a result, consumers were more jolly in December. The Conference Board’s Consumer Confidence Index jumped 9.7 points to a seasonally adjusted 110.7 (1985=100), its best reading since July. The present conditions index surged 12.0 points to 148.5, while the expectations index rose 8.2 points to 85.6. 21.7 percent of survey respondents viewed conditions as “good,” compared to 16.5 percent who said that they were “bad.” 40.7 percent of consumers reported jobs were “plentiful,” while 13.2 percent said they were “hard to find.” Rising prices remained the most common write-in comment made by survey respondents.
The University of Michigan Index of Consumer Sentiment gained 8.4 points to a seasonally adjusted 69.7 (1966Q1=100), also at its highest point since July and 13.7 percent above year-ago levels. The current conditions index increased 5.0 points to 73.3, while the expectations index swelled by 10.6 points to 67.4. Lessening concerns about inflation appear to be a key driver here—one-year inflation expectations plummeted from +4.5 percent to +3.1 percent and long-term inflation declined from +3.1 percent to +2.9 percent.
Another revision, another robust Q3 GDP report. The Bureau of Economic Analysis’s third estimate of Q3 Gross Domestic Product (GDP) has the U.S. economy expanding 4.9 percent on a seasonally adjusted annualized basis. This represented a downward revision from the previously reported 5.2 percent gain. Still, the value was strong by any measure (including being the fastest pace of economic expansion since the fourth quarter of 2021). Among the most significant industry contributors to Q3 GDP growth were retail trade, information, nondurable goods manufacturing, construction, and finance & insurance. The same BEA report indicates corporate profits swelled 3.4 percent during Q3 to an annualized $3.281 trillion. Corporate profits were down 0.6 percent from a year earlier.
Nonetheless, forward-looking measures continue to suggest storm clouds. The Conference Board’s Leading Economic Index (LEI) dropped a half percentage point to 103.0 (2016=100). The LEI has declined 3.5 percent over the past six months. Only three LEI components made positive contributions to the index: stock prices, new orders for civilian nonaircraft capital goods, and consumer goods orders. The Coincident Economic Index (CEI) improved by 0.2 percent to 111.2 (2016=100), leaving the measure up 1.0 percent over the past six months. All four CEI components made positive contributions to the measure, led by personal income. The Lagging Economic Index (LAG) rose a half percentage point to 119.2 (2016=100). The LAG was up 0.8 percent over the past six months. The Conference Board remains committed to its expectation of a “short and shallow” recession in 2024.
Existing home sales increased in November for the first time in six months. The National Association of Realtors reports sales of previously owned homes grew 0.8 percent to a still paltry seasonally adjusted annualized rate (SAAR) of 3.8 million units. Sales were 7.3 percent below that of a year earlier. Sales improved in the South and Midwest but fell in the Northeast and West. Few homes were available for sale—inventories of 1.13 million homes (-1.7 percent versus October 2023) translated into a 3.5 month supply. The median sales price of $387,600 was up 4.0 percent from a year earlier. NAR expects a “marked turn” in the housing market since “mortgage rates have plunged in recent weeks.”
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending December 16, 2023, First-Time Claims, seasonally adjusted): 205,000, +2,000 vs. the previous week, -7,000 vs. the same week a year earlier). 4-week moving average: 212,000 (+0.1% vs. the same week a year earlier).
- Housing Starts (November 2023, Privately-Owned Housing Starts, seasonally adjusted annualized rate): 1.560 million (+14.8% vs. October 2023; +9.3% vs. November 2022).
- New Home Sales (November 2023, Single-Family Home Sales, seasonally adjusted annualized rate): 590,000 (-12.2% vs. October 2023; +1.4% vs. November 2022).
- Housing Market Index (December 2023, Index (>50=More Homebuilders View Housing Market as “Good” than “Bad,” seasonally adjusted): 37 (November 2023: 34; December 2022: 31).
- State Employment (November 2023, Nonfarm Payrolls, seasonally adjusted): Increased in 3 states and held steady in 47 states and the District of Columbia vs. October 2023. Increased in 28 states and held steady in 22 states and the District of Columbia vs. November 2022.
- Treasury International Capital (October 2023, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): -$15.6 billion (September 2023: +0.2 billion; October 2022: +$63.7 billion.
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What We Learned About the U.S. Economy Last Week 