Spending More: March 25 – 29

Consumers returned in February. Here are the five things we learned from U.S. economic data released during the week ending March 29.

Personal spending rebounded in February. Real Personal Consumption Expenditures (PCE) grew a seasonally adjusted 0.4 percent, an improvement from January’s 0.2 percent drop for the Bureau of Economic Analysis’s measure. Spending on goods inched up 0.1 percent, split by a 1.2 percent jump for durables and a 0.6 percent decline for nondurables. Services expenditures increased 0.6 percent. Without the inflation adjustments, nominal PCE rose 0.8 percent, well above the increases for nominal personal (+0.3 percent) and disposable (+0.2 percent) income. Real disposable income slipped 0.1 percent. As a result, the savings rate fell by a half percentage point to +3.6 percent. Over the past year, real PCE has grown 2.4 percent, supported by a 1.7 percent boost in real disposable income. Declining slightly were the Federal Reserve’s preferred inflation measures. The PCE price index and the core PCE price index (net of energy and food) each grew 0.3 percent (January 2024: +0.4 percent and +0.5 percent, respectively). Over the past year, the PCE price index has grown 2.5 percent, while the core measure was up 2.8 percent. Both remained above the Fed’s two-percent inflation target.

Revised data present a slightly more positive GDP report for Q4 and healthy 2023 corporate profits. The Bureau of Economic Analysis’s third estimate for fourth quarter 2023 Gross Domestic Product now has the U.S. economy expanding 3.4 percent on a seasonally adjusted annualized rate (SAAR). Last month’s prior estimate put Q4’s annualized expansion rate at +3.2 percent. Personal consumption was responsible for 220 basis points of GDP growth, with smaller positive contributions from nonresidential fixed investment, government expenditures, and exports. Negatively contributing to GDP was the change in private inventories, fixed residential investment, and imports. The same report features the first estimates of Q4 corporate profits, which showed 4.1 percent growth for the quarter and a 5.1 percent boost for all of 2023.

Economic activity accelerated in February. The Chicago Fed National Activity Index (CFNAI) surged by 59 basis points to +0.05. A CFNAI above zero indicates the U.S. economy expanded quicker than its historical average. Forty-six of the CFNAI’s economic components made positive contributions to the index, with the other 39 being a drag. Among the four major categories of components, three made positive modest contributions: production, sales/orders/inventories, and employment. Personal consumption/housing had a neutral impact on the index. The CFNAI’s three-month moving average declined by seven basis points to -0.18.

Two consumer sentiment measures gave mixed views in March. The Conference Board’s Consumer Confidence Index slipped by 1/10^th of a point to a seasonally adjusted 104.7 (1985=100). The index was up 0.7 percent from a year earlier. The current conditions index added 3.4 points to 151.0, while the expectations measure backtracked 2.5 points to 73.8. The press release noted that “elevated price levels…predominated” consumers’ comments. 19.5 percent of consumers described current business conditions as “good,” above the 17.2 percent indicating conditions were “bad.” 43.1 percent of survey respondents reported that jobs were “plentiful,” compared to 10.9 percent that said they were “hard to get.”

The University of Michigan’s Index of Consumer Sentiment grew by 2.5 points to 79.4 (+28.1 percent versus March 2023). The current (82.5) and expected (77.4) conditions measures increased 2.5 points and 2.2 points, respectively. Edging down were one-year (+2.9 percent) and long-run (+2.8 percent) inflation expectations. The press release warns that consumers’ economic outlook “could become more volatile” as we approach this fall’s election.

Durable goods orders jumped in February. The Census Bureau reports that new orders for manufactured durable goods rose 1.4 percent to a seasonally adjusted $277.9 billion. Transportation goods orders gained 3.3 percent, boosted by both aircraft and vehicles. Non-transportation goods increased 0.5 percent, with gains for computers, machinery, primary metals, and fabricated metal products. Also rising were shipments, up 1.2 percent to $282.7 billion. Unfilled orders held steady at $1.339 trillion, while inventories expanded 0.3 percent to $528.7 billion.

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

• Jobless Claims (Week ending March 23, 2024, First-Time Claims, seasonally adjusted): 210,000, -2,000 vs. the previous week, -22,000 vs. the same week a year earlier). 4-week moving average: 211,000 (-7.0% vs. the same week a year earlier).
• New Home Sales (February 2024, New Single-Family Home Sales, seasonally adjusted annualized rate): 662,000 (-0.3% vs. January 2024, +5.9% vs. February 2023).
• Pending Home Sales (February 2024, Index (2001=100), seasonally adjusted): 75.6 (+1.6% vs. January 2024; -7.0% vs. February 2023).
• FHFA House Price Index (January 2024, Purchase-Only Index, seasonally adjusted): -0.1% vs. December 2023; +6.3% vs. January 2023.
• S&P Case-Shiller Home Price Index (January 2024, National Index, seasonally adjusted): +0.4% vs. December 2023; +6.0% vs. January 2023).
• Agricultural Prices (February 2024, Prices Received by Farmers, not seasonally adjusted): +7.1% vs. January 2024; -5.4% vs. February 2023.

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