Economic Winning Streak: July 22 – 26

The U.S. economy expanded faster during Q2. Here are five things we learned from U.S. economic data released during the week ending July 26.

The economic activity accelerated in Q2. Real Gross Domestic Product (GDP) increased by a seasonally adjusted annualized rate (SAAR) of 2.8 percent between April and June, double Q1’s 1.4 percent growth rate. The acceleration in economic growth relative to Q1 resulted from increased consumer spending and growth in private inventory investment. Contributing to Q2 economic growth were (in descending order) consumer spending, private inventory accumulation, fixed nonresidential investment, federal and state/local government spending, and exports. Weighing on GDP were imports and fixed residential investment spending. The Bureau of Economic Analysis will revise its Q2 GDP estimate twice over the next two months.

Personal spending growth slightly slowed as inflation stabilized in June. The Bureau of Economic Analysis estimates real Personal Consumption Expenditures (PCE) increased a seasonally adjusted 0.2 percent, half of May’s 0.4 percent bump. Spending on goods and services both rose 0.2 percent, with the former split between a 0.2 percent drop for durable goods and a 0.5 percent advance for nondurables. Without adjustments for inflation, nominal PCE grew 0.3 percent, funded by 0.2 percent increases in nominal personal and disposable income. Real disposable income eked out a 0.1 percent gain. The savings rate slipped 1/10^th of a percentage point to +3.4 percent. Real PCE has risen 2.6 percent over the past year, funded by a 1.0 percent increase in real disposable income. The same report shows that the PCE Price Index—the Federal Reserve’s preferred price gauge—increased by a modest 0.1 percent in June and core prices (net of energy and food) by 0.2 percent. Over the past year, the PCE Price Index has gained 2.5 percent, while the core measure’s 12-month comparable was +2.6 percent.

Existing home sales fell to a 2024 low in June. The National Association of Realtors reports sales of previously owned homes dropped 5.4 percent to a seasonally adjusted annualized 3.89 million units. Sales fell in all four Census regions, including sizable drops in the Midwest (-8.0 percent) and South (-5.9 percent). Sales were 5.4 percent below year-ago levels. Inventories continued building, up 3.1 percent to 1.320 million homes (+23.4 percent versus June 2023). This translates into a 4.1-month supply (nearly a four-year high). The median sales price of $426,900 was up 4.1 percent from a year earlier.

New home sales slipped in June. Sales of new single-family homes decreased 0.6 percent to a seasonally adjusted annualized 617,000 units. The Census Bureau measure was 7.4 percent below year-ago levels. Sales grew in the West (+1.4 percent) and South (+0.3 percent) but fell in the Northeast (-7.7 percent) and Midwest (-6.9 percent). There were 476,000 new homes on the market, up 0.8 percent for the month, 11.2 percent from a year earlier, and the equivalent of a 9.3-month supply. The median sales price of $417,300 was unchanged from a year earlier. 

Consumer sentiment slipped in July. The University of Michigan Index of Consumer Sentiment shed 1.8 points to a seasonally adjusted 66.4 (1966Q1=100). While the index was at an eight-month nadir, it remained 33 percent above its June 2022 historic low. The current conditions index lost 8/10^th to 68.8 (+0.7 percent versus July 2023), while the expectations measure dropped 3.2 points to 62.7 (-18.0 percent versus July 2023). One-year inflation expectation slipped by 1/10^th of a percentage point to +2.9 percent, while longer-term expectations held firm at +3.0 percent. The press release warned, “continued election uncertainty is likely to generate volatility in economic attitudes in the months ahead.”

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

• Jobless Claims (Week ending July 20, 2024, First-Time Claims, seasonally adjusted): 235,000, -10,000 vs. the previous week, +4,000 vs. the same week a year earlier). 4-week moving average: 235,500 (Unchanged vs. the same week a year earlier).
• Chicago Fed National Activity Index (June 2024, Index (0.00=U.S. Growing at its Historical Average, not seasonally adjusted): +0.05 (May 2024: +0.23; June 2023: -0.38).
• Durable Goods (June 2024, New Orders for Manufactured Durable Goods, seasonally adjusted): $264.5 billion (-6.6% vs. May 2024).

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