Consumers downshifted their spending in early 2024. Here are the five things we learned from U.S. economic data released during the week ending March 1.
Personal spending slowed and inflation picked up in January. The Bureau of Economic Analysis has real Personal Consumption Expenditures (PCE) slipping a seasonally adjusted 0.1 percent. This followed gains of 0.4 percent and 0.6 percent in November and December, respectively. Goods spending shrank 1.1 percent, with losses for both durable (-2.1 percent) and nondurable (-0.5 percent) goods. Services expenditures grew 0.4 percent. Nominal (non-inflation adjusted) PCE increased 0.2 percent, funded by gains for nominal personal income and disposable income of 1.0 percent and 0.3 percent, respectively. Real disposable income held steady in January. The savings rate added 1/10th of a percentage point to +3.8 percent. The PCE price index and the core PCE price index—the Federal Reserve’s preferred measures of inflation—jumped to +0.3 percent and +0.4 percent, respectively. Both were at +0.1 percent in December. The measures have risen 2.4 percent and 2.8 percent over the past year (both were above the Fed’s two-percent target inflation rate).
Revised data continue to signal strong Q4 economic growth. The Bureau of Economic Analysis’s second estimate of 2023Q4 Gross Domestic Product (GDP) has the U.S. economy expanding at a seasonally adjusted annualized rate (SAAR) of 3.2 percent. This represented a slight downward revision from the 3.3 percent annualized growth rate reported a month earlier, reflecting lower than previously believed levels of private inventory accumulation and federal government spending. Contributing to Q4 GDP growth were (in declining order) personal consumption, state/local government spending, exports, nonresidential fixed investment, federal government spending, and residential fixed investment. The BEA will update its Q4 GDP estimates again at the end of March.
Consumer sentiment hit a bump in February. The Conference Board’s Consumer Confidence Index lost 4.2 points to a seasonally adjusted 106.7 (1985=100). (The loss from January was even greater than the official numbers suggest, as the January estimate of 110.9 reflected a 3.9-point downward revision.) The current conditions index slumped 7.7 points to 147.2, while the expectations measure shed 1.7 points to 79.8. 21.2 percent of survey respondents believe current conditions were “good,” compared to 17.1 percent who saw them as “bad.” 41.3 percent of consumers indicate that jobs were “plentiful,” while 13.5 percent say they are “hard to get.” The press release noted that consumers were “more concerned about the labor market situation and the U.S. political environment.”
The University of Michigan’s Index of Consumer Sentiment dropped 2.1 points to a seasonally adjusted 76.9 (1966Q1=100). Despite the decline, the index was up 14.9 percent from a year earlier. The current conditions index declined by 2.5 points to 79.4 (+12.3 percent versus February 2023), while the expectations measure lost 1.9 points to 75.2 (+16.6 percent versus February 2023). Consumers expect prices will rise 3.0 percent over the next year, with long-term inflation expectations at +2.9 percent.
Manufacturing sector activity slowed in February. The Institute for Supply Management’s PMI dropped 1.3 points to 47.8. The PMI has remained under 50.0—the threshold between an expanding and contracting manufacturing sector—for 13 straight months. Indices for new orders, production, employment, and inventories all fell and were under 50.0. Eight of 18 tracked manufacturing sectors of the U.S. economy reported growth, led by apparel, nonmetallic mineral products, and primary metals. The press release noted that demand was “slowing.”
Durable goods orders fell in January. The Census Bureau reports that new orders for manufactured goods decreased for the third time in four months, declining 6.1 percent to a seasonally adjusted $276.7 billion. Transportation goods slumped 16.2 percent as orders for civilian aircraft and motor vehicles dropped 58.9 percent and 0.4 percent, respectively. Non-transportation durable goods orders slowed 0.3 percent. Nonaircraft civilian capital goods orders eked out a 0.1 percent gain. Durable goods shipments fell 0.9 percent to $279.0 billion. Growing 0.2 percent were both unfilled orders ($1.395 trillion) and inventories ($527.6 billion).
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending February 24, 2024, First-Time Claims, seasonally adjusted): 215,000, +13,000 vs. the previous week, -6,000 vs. the same week a year earlier). 4-week moving average: 212,500 (-2.7% vs. the same week a year earlier).
- New Home Sales (January 2024, Sales of New Single-Family Homes, seasonally adjusted annualized rate): 661,000 (+1.5% vs. December 2023; +1.8% vs. January 2023).
- Pending Home Sales (January 2024, Index (2001=100), seasonally adjusted): 74.3 (-4.9% vs. December 2023; -8.8% vs. January 2023).
- Construction Spending (January 2024, Value of Construction Put in Place, seasonally adjusted annualized rate): $2.102 trillion (-0.2% vs. December 2023; +11.7% vs. January 2023).
- FHFA Home Price Index (December 2023, Purchase-Only Index, seasonally adjusted): +0.1% vs. November 2023; +6.6% vs. December 2022.
- S&P Case-Shiller House Price Index (December 2023, National Index, seasonally adjusted): +0.2% vs. November 2023; +5.5% vs. December 2022.
- Agricultural Prices (January 2024, Prices Received by Farmers, not seasonally adjusted): -1.4% vs. December 2023; -10.4% vs. January 2023).
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What We Learned About the U.S. Economy Last Week 