Consumer spending started 2025 with a decline. Here are the five things we learned from U.S. economic data released during the week ending February 28.
Consumer spending fell in January. Real Personal Consumption Expenditure (PCE) slowed by a seasonally adjusted 0.5 percent, following gains in November (+0.4 percent) and December (+0.5 percent). The Bureau of Economic Analysis also finds that goods spending plummeted by 1.7 percent, with sharp declines in both durables (-3.4 percent) and (-0.8 percent). Services expenditures edged up 0.1 percent. Without inflation adjustments, nominal PCE slipped 0.2 percent even as nominal personal (+0.9 percent) and disposable (+0.9 percent) income both rose. Real disposable income jumped 0.6 percent. The savings rates surged by 1.1 percentage points to +4.6 percent, its highest point since last June. Over the past year, real PCE has increased 2.9 percent as real disposable income has grown 1.8 percent.
The same report includes data on the PCE Price Index, which grew a seasonally adjusted 0.3 percent (matching its December advance) and has risen 2.5 percent over the past year. Net of energy and food, the core PCE Price Index gained 0.3 percent in January (December: +0.3 percent) and 2.6 percent over the past year. Both 12-month comparables remained above the Fed’s two-percent inflation target.
The U.S. economy moderately expanded during Q4. The Bureau of Economic Analysis made a slight upward revision to its 2024Q4 Gross Domestic Product (GDP) estimate, finding the U.S. economy had grown 2.3 percent on a seasonally adjusted annual basis. This was off from Q3’s 3.1 percent advance, leaving 2024 GDP growth at 2.8 percent (2023: +2.9 percent). Consumers drove Q4 growth, with consumption adding 279 basis points to GDP growth. Also making positive contributions were government expenditures, residential fixed investment, and net imports. Hurting growth were the change in private inventories and nonresidential fixed investment. The BEA will revise its Q4 GDP estimate once again in late March.
Economic activity slightly decelerated in January. The Chicago Fed National Activity Index (CFNAI) declined by 21 basis points to -0.03. When the CFNAI is within a range of -0.70 and zero, it indicates the U.S. economy is expanding slower than its historical average. Despite the decline, the CFNAI was well above its year-ago mark of -0.83. Thirty-nine of 85 CFNAI components made positive contributions to the index, with the other 46 dragging down the index. Among the four major component categories, those for production and employment positively impacted the index, sales/orders/inventories had a neutral effect, and personal consumption/housing had a negative impact. The CFNAI’s three-month moving average added ten basis points to +0.03.
New home sales deflated in January. Sales of new single-family dropped 10.5 percent to a seasonally adjusted annualized rate (SAAR) of 657,000. The Census Bureau measure was down 1.1 percent from a year earlier. Sales slumped in three of four Census regions, with the West showing a gain. There were 495,000 new homes available for purchase (equivalent to a 9.0-month supply), up 1.4 percent for the month and 7.4 percent from a year earlier. The median sales price of $446,300 was up 3.7 percent from January 2024
Consumers were more pessimistic in February. The Conference Board’s Consumer Confidence Index plummeted 7.0 points to a seasonally adjusted 98.3 (1985=100). The index was down 11.4 percent from a year earlier. The current conditions index lost 3.4 points to 136.5, while the expectations measure slumped 9.3 points to 72.9 (below the 80.0 brightline of a possible recession). Sentiment fell across all age groups (with those 35-55 showing the most extensive deterioration) and most income brackets. Inflationary expectations surged, rising 8/10ths of a percentage point to +6.0 percent. Comments referenced prices, tariffs, and policies coming from the White House.
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending February 22, 2025, First-Time Claims, seasonally adjusted): 242,000, +22,000 vs. the previous week, +29,000 vs. the same week a year earlier). 4-week moving average: 224,000 (+7.0% vs. the same week a year earlier).
- Pending Home Sales (January 2025, index (2001=100), seasonally adjusted): 70.6 (-4.6% vs. December 2024; -5.2% vs. January 2024).
- FHFA House Price Index (December 2024, Purchase-Only Index, seasonally adjusted): +0.4% vs. November 2024; +4.7% vs. December 2023).
- S&P Case-Shiller Home Price Index (December 2024, National Index, seasonally adjusted): +0.5% vs. November 2024; +3.9% vs. December 2023).
- Agricultural Prices (December 2024, Prices Received by Farmers, not seasonally adjusted): +5.3% vs. November 2024; +11.8% vs. December 2023.
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What We Learned About the U.S. Economy Last Week 