Consumer spending wobbled and inflation remained above target in February. Here are the five things we learned from U.S. economic data released during the week ending March 28.
Personal spending inched up and prices jumped in February. Real Personal Consumption Expenditures (PCE) increased a seasonally adjusted 0.1 percent, an improvement from the Bureau of Economic Analysis measure’s 0.6 percent drop in January. Goods spending gained 0.7 percent, with increases for both durables (+1.0 percent) and nondurables (+0.5 percent). Services expenditures slipped 0.1 percent. Without adjustments for inflation, nominal PCE grew 0.4 percent, supported by gains for nominal personal income (+0.8 percent) and disposable income (+0.9 percent). Real disposable income grew 0.5 percent. The savings rate increased by 3/10ths of a percentage point to +4.6 percent. Over the past year, real PCE rose 2.7 percent as real disposable income gained 1.8 percent. The same report includes the closely watched PCE Price Index, which increased 0.3 percent in February and has grown 2.5 percent over the past year. After removing food and energy, the core inflation was +0.4 percent for the month and +2.8 percent for the past year.
Consumer sentiment faltered as concerns about inflation surged in March. The Conference Board’s Consumer Confidence Index plummeted 7.2 points to a 12-year low of 92.9 (seasonally adjusted, 1985=100). The current conditions index lost 3.6 points to 134.5, while the expectations index 9.6 points to 65.2 (also a 12-year low). An expectations reading below 80.0 “usually signals a recession ahead.” The press release noted that sentiment deteriorated among middle-aged and older consumers (35 and above) and those with household incomes below $125,000. Commenters also expressed concerns about inflation and tariffs.
The University of Michigan’s Index of Consumer Sentiment also was in a freefall, losing 7.7 points in March to a seasonally adjusted 57.0 (1966Q1). The index has fallen 28.2 percent over the past year. The current conditions index declined by 1.9 points to 63.8, while the expectations measure tumbled 11.4 points to 52.6. The latter has fallen by nearly a third since November. Two-thirds of survey respondents expect unemployment to grow over the next 12 months (the most saying so since 2009). Consumers expect prices to rise 5.0 percent over the next year (its highest since November 2022) and 4.1 percent annually over the long run.
GDP grew slightly faster than previously believed as 2024 wrapped up. The Bureau of Economic Analysis’s (BEA) third estimate of 2024 Q4 Gross Domestic Product (GDP) has the U.S. economy expanding at a seasonally adjusted annualized rate of 2.4 percent. This was an upward revision by 1/10th of a percentage point due to a lowered imports estimate. Positive contributors to Q4 economic growth were (in descending order) consumer spending, fixed residential investment, net exports, and government spending. The change in private inventories and fixed nonresidential investment were drags on the economy. The same report finds corporate profits rose an annualized 5.4 percent during Q4.
Economic activity accelerated in February. The Chicago Fed National Activity Index (CFNAI) grew by 26 basis points to +0.18. A positive CFNAI reading signals that the U.S. economy is expanding faster than its historical average. Forty-seven of 85 CFNAI components made positive contributions to the index, with the remaining 38 having a negative impact. Two of four major component categories were in positive territory: production (+0.19) and employment (+0.02). Drags on the CFNAI were components tracking sales/orders/inventories (-0.01) and personal consumption/housing (-0.01). The CFNAI’s three-month moving average added eight basis points to +0.15 (its best reading since April 2022).
Durable goods orders grew in February. The Census Bureau reports new orders for manufactured durable goods jumped 0.9 percent to a seasonally adjusted $289.3 billion. Orders during January and February were 2.3 percent ahead of the comparable 2024 months. Transportation goods orders increased 1.5 percent, with sizable gains for motor vehicles/parts and defense aircraft. Excluding transportation, core durable goods grew 0.7 percent. Growing were orders for electrical equipment/appliances (+2.0 percent), primary metals (+1.2 percent), fabricated metal products (+0.9 percent), and machinery (+0.2 percent). Shipments increased 1.2 percent to $282.3 billion. Durable goods shipments this year were up 1.3 percent from the first two months of 2024.
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending March 22, 2025, First-Time Claims, seasonally adjusted): 224,000, -1,000 vs. the previous week, +10,000 vs. the same week a year earlier). 4-week moving average: 224,000 (+5.2% vs. the same week a year earlier).
- New Home Sales (February 2025, Sales of New Single-Family Homes, seasonally adjusted annualized rate): 676,000 (+1.8% vs. January 2025; +5.1% vs. February 2024).
- Pending Home Sales (February 2025, Index (2001=100), seasonally adjusted): 72.0 (+2.0% vs. January 2025; -3.6% vs. February 2024).
- FHFA House Price Index (January 2025, Purchase-Only Index, seasonally adjusted): +0.2% vs. December 2024; +4.8% vs. January 2024.
- S&P Case-Shiller (January 2025, National Index, seasonally adjusted): +0.6% vs. December 2024; +4.1% vs. January 2024.
- State Employment (February 2025, Nonfarm Payrolls, seasonally adjusted): Increased in 3 states and unchanged in 47 states and the District of Columbia vs. January 2025. Increased in 17 states and unchanged in 33 states and the District of Columbia vs. February 2024.
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What We Learned About the U.S. Economy Last Week 