Consumer spending was soft this spring. Here are the five things we learned from U.S. economic data released during the week ending May 31.
Consumer spending declined in April. The Real Personal Consumption Expenditures (PCE) slipped a seasonally adjusted 0.1 percent after growing 0.3 percent and 0.4 percent in February and March, respectively. Real spending on goods dropped 0.4 percent (with losses for both durables (-0.1 percent) and nondurables (-0.5 percent), while services expenditures edged up 0.1 percent. Nominal PCE (not adjusted for inflation) increased 0.2 percent, funded by gains in nominal personal income (+0.3 percent) and nominal disposable income (+0.2 percent). Real disposable income contracted 0.1 percent. The savings rate held steady at +3.6 percent. Over the past year, real PCE has grown 2.6 percent, while real disposable income has risen a more modest 1.0 percent. The same Bureau of Economic Analysis report features the Federal Reserve’s preferred inflation measure: the PCE price index. The measure grew 0.3 percent in April and has risen 2.7 percent over the past year. The core PCE price index (removing food and energy) increased 0.2 percent during the month and has grown 2.8 over the past 12 months. Both measures remained above the Fed’s two-percent inflation rate target.
A lower estimate of Q2 economic growth. Real Gross Domestic Product (GDP) grew at a seasonally adjusted annualized rate (SAAR) of 1.3 percent. The Bureau of Economic Analysis estimate was below the 1.6 percent rate reported a month ago and 2023 Q4’s 3.4 percent annualized growth rate. The downward revision resulted from lower than previously believed levels of consumer spending. The most significant contributors to Q1 GDP growth were (in descending order) personal consumption expenditures, fixed residential and nonresidential investment, and state/local and federal government expenditures. Weighing on Q1 growth were net exports and the change in private inventories. The same report finds corporate profits fell an annualized 0.6 percent during the quarter.
A consumer confidence measure ended its three-month losing streak in May. The Conference Board’s Consumer Confidence Index rose 4.5 points to a seasonally adjusted 102.0 (1985=100). The current conditions index added 2.5 points to 143.1, while the expectations measure surged by 5.8 points to 74.6. Despite its fourth consecutive monthly improvement, the expectations index remaining below 80 “usually signals a recession ahead.” Further, confidence was “highest among the youngest (under 35) and wealthiest (making over $100K) consumers.”
Fewer Americans signed contracts to purchase homes in April. The National Association of Realtors’ Pending Home Sales Index (PHSI) dropped 7.7 percent to a seasonally adjusted 72.3 (2001=100). The measure, which tracks housing contract activity, was 7.4 percent below year-ago levels and at a four-year low. The index fell in all four Census regions on both a month-to-month and year-to-year basis. NAR estimates that the PHSI foretells its existing home sales measure “by a month or two.” The press release notes, “[t]he impact of escalating interest rates throughout April dampened home buying.”
Jobless claims held steady as May ended. The Department of Labor reports there were a seasonally adjusted 219,000 first-time claims made for unemployment insurance benefits during the week ending May 25. Claims were up 3,000 for the week but down 12,000 from the same week a year ago. The three-month moving average of 222,500 was down 2.0 percent from a year earlier. 1.711 million people (not seasonally adjusted) were receiving some form of unemployment insurance benefits during the week of May 11, up 4.5 percent from a year earlier.
Other U.S. economic data released over the past week:
- FHFA House Price Index (March 2024, Purchase-Only Index, seasonally adjusted): +0.1% vs. February 2024; +6.7% vs. March 2023.
- S&P Case-Shiller (March 2024, National Index, seasonally adjusted): +0.3% vs. February 2024; +6.5% vs. March 2023.
- Agricultural Prices (April 2024, Prices Received by Farmers, not seasonally adjusted): +0.2% vs. March 2024; +6.3% vs. April 2023.
- Beige Book
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What We Learned About the U.S. Economy Last Week 