The Fed’s preferred inflation measures cooled in May. Here are the five things we learned from U.S. economic data released during the week ending June 28.
Personal spending picked up and prices stabilized in May. Real Personal Consumption Expenditures (PCE) increased a seasonally adjusted 0.3 percent after the Bureau of Economic Analysis measure declined 0.1 percent in April. Goods spending accelerated 0.6 percent (durable goods: +1.1 percent, nondurables: +0.3 percent). Services expenditures inched up 0.1 percent. Without inflation adjustments, nominal PCE increased 0.2 percent, funded by half-percentage point gains for nominal personal and disposable income. Real disposable income also increased 0.5 percent. The savings rate grew by 2/10ths of a percentage point to +3.9 percent. Real PCE has risen 2.4 percent over the past year, supported by a 1.1 percent increase in real disposable income. The same report features the Federal Reserve’s preferred inflation measures: the PCE price index held steady in May, while the core measure (net of energy and food) increased a modest 0.1 percent. On a year-to-year basis, both the headline and core PCE Price Indices have grown 2.6 percent.
A slight upward revision to the estimate of Q1 economic growth. Real Gross Domestic Product (GDP) grew 1.4 percent seasonally adjusted during the first three months of 2024. This was the Bureau of Economic Analysis’s (BEA) third estimate of Q1 GDP. Last month, the BEA estimated Q1 GDP growth to be +1.3 percent. Positively contributing to economic growth were (in descending order) personal consumption, fixed residential & nonresidential investment, and government expenditures. Dragging down additional growth were net exports and the change in private inventories. Corporate profits fell 1.4 percent during the quarter but have risen 6.4 percent over the past year.
Economic activity accelerated in May. The Chicago Fed National Activity Index (CFNAI) rose by 44 basis points to +0.18. A reading above zero indicates that the U.S. economy was expanding above its historical average. Forty-eight of 85 CFNAI components made positive contributions to the index. Among the four component categories, only production items made a positive contribution (+0.23). Employment measures had a neutral impact, while those for personal consumption/housing (-0.03) and sales/orders/inventories (-0.02) made small negative contributions. The CFNAI’s three-month moving average deteriorated slightly, losing four basis points to -0.09.
Consumer sentiment slipped in June. The Conference Board’s Consumer Confidence Index declined 9/10ths of a point to 100.4 (1985=100). The current conditions index added 7/10ths of a point to 141.5, while the expectations measure shed 1.9 points to 73.0. The latter has been below 80 (which historically “signals” a recession) for five straight months. Average inflation expectations were at +5.3 percent (down 1/10th of a percentage point from April). The press release notes respondents under 35 and those earning over $100,000/year were the most optimistic.
Meanwhile, the University of Michigan’s Index of Consumer Sentiment declined 9/10ths of a point to 68.2 (1966Q1=100). Even with the drop, the index remained up 6.2 percent from a year earlier. The current conditions index decreased by 3.7 points to 65.9 (-4.4 percent versus June 2023), while the expectations index improved by 7/10ths of a point to 69.6 (+13.9 percent versus June 2023). One-year inflation expectations dropped by 3/10ths of a percentage point to +3.0 percent. Long-term inflation expectations also were at +3.0 percent.
Soft growth for durable goods orders in May. The Census Bureau estimates new orders for durable manufactured goods increased 0.1 percent to a seasonally adjusted $283.1 billion. Transportation goods orders rose 0.6 percent, boosted by gains for motor vehicles and defense aircraft. Net of transportation goods, orders slipped 0.1 percent. Whereas orders increased for fabricated metal products and computers/electronic products, they fell for primary metals and machinery. Durable goods shipments declined 0.3 percent to $284.7 billion. Growing were unfilled orders (+0.2 percent to $1.403 trillion) and inventories (+0.3 percent to $530.1 billion).
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending June 22, 2024, First-Time Claims, seasonally adjusted): 233,000, -6,000 vs. the previous week, -5,000 vs. the same week a year earlier). 4-week moving average: 236,000 (-6.9% vs. the same week a year earlier).
- Pending Home Sales (May 2024, Index (2001=100), seasonally adjusted): 70.8 (-2.1% vs. April 2024; -6.6% vs. May 2023).
- FHFA House Price Index (April 2024, Purchase-Only Index, seasonally adjusted): +0.2% vs. March 2024; +6.3% vs. April 2023.
- S&P/Case-Shiller Home Price Index (April 2024, National Index, seasonally adjusted): +0.3% vs. March 2024; +6.3% vs. April 2023.
- State Employment (May 2024, Nonfarm Payrolls, seasonally adjusted): Vs. April 2024: Increased in 7 states and the District of Columbia and unchanged in 43 states. Vs. May 2023: Increased in 30 states and unchanged in 20 states and the District of Columbia.
- Agricultural Prices (May 2024, Prices Received by Farmers, not seasonally adjusted): +0.9% vs. April 2024, -2.7% vs. May 2023.
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What We Learned About the U.S. Economy Last Week 