The Federal Reserve remained in a holding pattern. Here are the five things we learned from U.S. economic data released during the week ending June 14.
The Fed held firm and signaled only one rate cut this year. The statement released following this past week’s Federal Open Market Committee (FOMC) meeting nearly matched that from the May meeting. Two exceptions were that the committee now sees the economy making “modest” progress toward the Fed’s two-percent inflation goal (previously, it noted “a lack of progress”), and it removed details of how the central bank intended to reduce its Treasury and mortgage-back securities holdings. Otherwise, the statement characterized economic expansion as being “at a solid pace,” with “strong” job gains and “elevated” inflation.” As a result, the FOMC voted unanimously to keep the fed funds target rate within a range of 5.25 percent to 5.50 percent.
Released concurrently were updated economic forecasts from the Federal Reserve Board members and Bank presidents. The median forecast now has only a single quarter-point short-term interest rate cut this year (down from the previously forecasted three) and four quarter-point cuts in 2025. It also has the U.S. economy expanding 2.1 percent this year and 2.0 percent next year, with unemployment staying low (4.0 percent at the end of this year and 4.1 percent next year) and the inflation rate slowly declining.
Consumer prices held steady in May. The Consumer Price Index (CPI) was unchanged seasonally adjusted, the first time the Bureau of Labor Statistics measure failed to increase since July 2022. Energy CPI fell 2.1 percent (gasoline: -3.6 percent), while prices edged up 0.1 percent. Net of both, core CPI grew 0.2 percent, its smallest 2024 gain. Increasing were prices for medical care commodities (+1.3 percent), used cars/trucks (+0.6 percent), shelter (+0.4 percent), and medical care services (+0.3 percent). Prices fell for new vehicles (-0.5 percent), transportation services (-0.5 percent), and apparel (-0.3 percent). Headline CPI has risen 3.3 percent over the past year, while core CPI’s 12-month comparable was +3.4 percent.
Wholesale prices slipped in May. The Producer Price Index (PPI) for final demand declined a seasonally adjusted 0.2 percent, the first decline for the Bureau of Labor Statistics measure since last December. Core PPI—removing energy, food, and trade services—held steady in May (not increasing for the first time in a year). Goods PPI fell 0.8 percent, with energy (-4.8 percent) and food (-0.1 percent) both falling. Services PPI was unchanged for the month. Over the past year, headline PPI has grown 2.2 percent, while the core measure has risen 3.2 percent.
Consumer sentiment softened in early June. The University of Michigan’s Index of Consumer Sentiment dropped 3.5 points to a seasonally adjusted 65.6 (1966Q1=100). Despite the decline, the index remained 2.2 percent ahead of year-ago levels and was more than 30 percent above its recent lows two years ago. The current conditions index declined 1.2 points to 67.6 (+10.6 percent versus June 2023), while the expectations measure fell 7.1 points to 62.5 (-9.3 percent versus June 2023). The press release notes that consumers expect prices to rise 3.3 percent over the next year (unchanged from last month’s survey), while long-term inflation expectations inched up 1/10th of a percentage point to +3.1 percent.
Small business owners remained moody in May. The Small Business Optimism Index from the National Federation of Independent Business (NFIB) added 8/10ths of a point to 90.5 (1986=100). The index has failed to top 100 for 34 months. Among ten index components, five made positive contributions (including expectations for the economy and plans to increase employment), two had a neutral impact, and three made a negative contribution (including earning trends and current inventories). The press release notes that more than one in five survey respondents view inflation as “their single most important problem in operating their business.”
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending June 8, 2024, First-Time Claims, seasonally adjusted): 242,000, +13,000 vs. the previous week, -18,000 vs. the same week a year earlier). 4-week moving average: 227,000 (-6.7% vs. the same week a year earlier).
- Import Prices (April 2024, All Imports, not seasonally adjusted): +0.9% vs. March 2024; +1.1% vs. April 2023. Nonfuel Imports: +0.7% vs. March 2024; +0.9% vs. April 2023.
- Export Prices (April 2024, All Exports, not seasonally adjusted): +0.5% vs. March 2024; -1.0% vs. March 2023. Nonagricultural Exports: +0.7% vs. March 2024; +0.1% vs. April 2023.
- Treasury Budget (April 2024, Federal Government Budget Deficit Thus Far in FY2024): -$1.202 trillion (+3.1% vs. the comparable FY2023 months).
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What We Learned About the U.S. Economy Last Week 