Less Savings: August 26 – August 30

Consumers slowed their pace of savings to maintain their spending. Here are the five things we learned from U.S. economic data released during the week ending August 30

July saw a solid rise in consumer spending and a drop in the savings rate. Real Personal Consumption Expenditures (PCE) increased a seasonally adjusted 0.4 percent, up from June’s 0.3 percent bump. The Bureau of Economic Analysis report finds spending on goods and services gaining 0.7 percent and 0.2 percent, respectively (durable goods: +1.7 percent and nondurable goods: +0.2 percent). Nominal (not-inflation adjusted) PCE rose 0.5 percent, funded by 0.3 percent advances in both nominal personal income and disposable income. Real disposable income eked out a 0.1 percent increase. The savings rate fell to a post-pandemic low of +2.9 percent. The PCE Price Index and the core PCE Price Index (without energy and food) gained 0.2 percent, their largest increases since April. The two measures were up 2.5 percent and 2.6 percent over the past year.

A slight upward revision for Q2 economic growth. The Bureau of Economic Analysis released its second Q2 Gross Domestic Product estimate, now showing the U.S. economy expanding 3.0 percent on a seasonally adjusted annualized basis. The first estimate had GDP rising 2.8 percent. The upward revision was thanks to higher levels of consumer spending than previously believed. Q2 GDP growth resulted from (in descending order) consumer spending, private inventory accumulation, nonresidential fixed investment, federal and state/local government spending, and exports. Both residential fixed investment and imports were drags on economic growth. The same report shows that corporate profits rose 1.7 percent for the quarter and 8.0 percent from a year earlier. The BEA will review Q2 GDP and corporate profits at the end of September.

One consumer sentiment measure edged up in August. The University of Michigan Index of Consumer Sentiment added 1.5 points to a seasonally adjusted 67.9 (1966Q1=100). The index was up 2.3 percent for the month and 36 percent from its all-time low of June 2022 but remained 2.2 percent below year-ago levels. The current conditions index declined 2.2 percent to 61.3 (August 2023: 75.5), while the expectations measure rose 4.8 percent to 72.1 (August 2023: 65.4). The press release noted that people identifying as Democrats “exhibited a large 10 percent increase in sentiment” as Republicans “posted an equally sized decline” after Vice President Harris announced her White House aspirations.

…As did a second index. The Conference Board’s Consumer Confidence Index increased by 1.4 points to a seasonally adjusted 103.3 (195=100). Even with the increase, the index remained 5.0 percent below year-ago levels. The current conditions index added 1.3 points to 134.4, while the expectations measure advanced 1.4 points to 82.5. August was the second consecutive month with the forward-looking reading above 80.0 (a reading below that tends to suggest a recession is near). Even as inflation expectations have eased, “prices and inflation” remained the most common comment provided by survey respondents.

Durable goods orders wobbled in July. The Census Bureau reports that new orders for manufactured goods surged 9.9 percent to a seasonally adjusted $289.6 billion. But much of the gain came from civilian aircraft orders (which increased after contracting in June). After removing transportation goods, core durable goods orders declined 0.2 percent. While orders inched 0.2 percent for fabricated metal products and held steady for machinery, they declined for primary metals, computers/electronics, and electrical equipment/appliances. Durable goods shipments jumped 1.1 percent to $291.1 billion, although they fell 0.2 percent net of transportation goods.   

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

• Jobless Claims (Week ending August 24, 2024, First-Time Claims, seasonally adjusted): 231,000, -2,000 vs. the previous week, -3,000 vs. the same week a year earlier). 4-week moving average: 231,500 (-5.6% vs. the same week a year earlier).
• Pending Home Sales (July 2024, Index (2001=100), seasonally adjusted): 70.2 (-5.5% vs. June 2024; -8.5% vs. July 2023).
• FHFA House Price Index (June 2024, Purchase-Only Index, seasonally adjusted): -0.1% vs. May 2024; +5.1% vs. June 2023.
• S&P Case-Shiller Home Price Index (June 2024, National Index, seasonally adjusted): +0.2% vs. May 2024; +5.4% vs. June 2023.
• Agricultural Prices (July 2024, Prices Received by Farmers, not seasonally adjusted): -2.7% vs. June 2024; -1.2% vs. July 2023.

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