Consumer spending and inflation both moderated in August. Here are the five things we learned from U.S. economic data released during the week ending September 27.
Personal spending eked out a small gain, and inflation fell to a four-year low in August. Real Personal Consumption Expenditures (PCE) grew a seasonally adjusted 0.1 percent, slower than June’s and July’s 0.3 percent and 0.5 percent increases. Spending on services rose 0.2 percent while that for goods was unchanged. Without adjustments for price changes, nominal expenditures advanced by 0.2 percent, funded by matching 0.2 percent gains for nominal personal income and disposable income. Real disposable income was up 0.2 percent for the month. The saving rate slipped 1/10th of a percentage point to +4.8 percent. Real PCE has risen 2.9 percent over the past year, supported by a 3.1 percent jump in real disposable income. The same Bureau of Economic Analysis report has the closely watched PCE Price Index inching up 0.1 percent in August (half of July’s 0.2 percent gain) and growing 2.2 percent over the past year (its smallest year-to-year increase since February 2021). Removing both energy and food, core prices gained 0.1 percent during the month and 2.7 percent over the past year.
The U.S. economy expanded last spring at its fastest pace in three quarters. Real Gross Domestic Product (GDP) swelled 3.0 percent on a seasonally adjusted annualized basis. This was the third Q2 GDP estimate by the Bureau of Economic Analysis, up from the initially reported 2.8 percent advance and mirroring last month’s second estimate. Consumer expenditures were responsible for 190 basis points of economic growth, with other positive contributions coming from the change in private inventories (+105 basis points), nonresidential fixed investment (+53 basis points), and government expenditures (+52 basis points). Net exports (-90 basis points) and residential fixed investment (-11 basis points) held back economic growth. Corporate profits were up 3.6 percent in Q2 and 10.8 percent over the past year.
Economic activity accelerated in August. The Chicago Fed National Activity Index rose by 54 basis points to +0.12 (its best reading since May). A positive CFNAI indicates that the U.S. economy expanded faster than its historical average. Only 36 of the 85 CFNAI components positively contributed positively to the index, while the other 49 pulled down the index. Among the four component categories, only those tied to production made a positive contribution (+0.24). Making negative contributions were indices for sales/orders/inventories (-0.04), personal consumption/housing (-0.04), and employment (-0.01). The CFNAI’s three-month moving average slipped four basis points to -0.17. The moving average has been in negative territory for nearly two years.
Two consumer sentiment surveys moved in opposite directions in September. The Conference Board’s Consumer Confidence Survey plummeted by 6.9 points to a seasonally adjusted 98.7 (1985=100). The current conditions index slumped 10.3 points to 124.3, while the expectations index dropped 4.6 points to 81.7. (Note that an expectations index below 80 has previously signaled a recession). 18.8 percent of survey respondents view current business conditions as “good,” compared to 20.2 percent that view them as “bad.” 30.9 percent of Americans feel that jobs are “plentiful,” more than 18.3 percent say they are “hard to get.” The press release linked the deteriorated confidence to “concerns about the labor market and reactions to fewer hours, slower payroll increases, [and] fewer job openings.”
In contrast, the University of Michigan’s Index of Consumer Sentiment added 2.2 points to a seasonally adjusted 70.1 (1966Q1=100). The index was up 3.2 percent from a year earlier. The current conditions added two full points to 63.3 (September 2023: 71.1), whereas the expectations index increased by 2.3 points to 74.4 (September 2023: 65.7). The press release notes that “many consumers continue to report that their expectations hinge on the results of the upcoming election.”
New home sales slowed in August. Sales of new single-family homes declined 4.7 percent to a seasonally adjusted annualized rate (SAAR) of 716,000. Even with the drop, the Census Bureau measure was 9.8 percent above year-ago levels. Sales fell in three of four Census regions, with activity growing 2.7 percent in the South. There were 467,000 new homes on the market, up 1.7 percent for the month and 9.1 percent from a year earlier. The median sales price of $420,600 represented a 4.6 percent decline from August 2023.
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending September 21, 2024, First-Time Claims, seasonally adjusted): 218,000, -4,000 vs. the previous week, +5,000 vs. the same week a year earlier). 4-week moving average: 224,750 (+2.4% vs. the same week a year earlier).
- Durable Goods (August 2024, New Orders for Manufactured Durable Goods, seasonally adjusted): $289.7 billion (Unchanged vs. July 2024).
- Pending Home Sales (August 2024, Index (2001=100), seasonally adjusted): 70.6 (+0.6% vs. July 2024; -3.0% vs. August 2023).
- FHFA House Price Index (July 2024, Purchase-Only Index, seasonally adjusted): +0.1% vs. June 2024; +4.5% vs. July 2023.
- S&P Case-Shiller Home Price Index (July 2024, National Index, seasonally adjusted): +0.2% vs. June 2024; +5.0% vs. July 2023.
- Agricultural Prices (August 2024, Prices Received by Farmers, not seasonally adjusted): +3.8% vs. July 2024; +1.8% vs. August 2024.
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What We Learned About the U.S. Economy Last Week 