Consumer Spending Wobbled Again: May 27 – 31

Real consumer spending failed to grow in April. Here are the five things we learned from U.S. economic data released during the week ending May 31.

#1Personal spending growth matched price gains in April. Real personal consumption expenditures (PCE) were unchanged on a seasonally adjusted basis during the month, down from a 0.9 percent jump in March. Real spending on goods grew 0.1 percent, as a 0.3 percent bounce in spending of nondurables outweighed a 0.4 percent drop for durables expenditures. Real spending on services slipped 0.1 percent. The same Bureau of Economic Analysis report has the PCE deflator, a measure of inflation, growing by 0.3 percent during the month, which means nominal (not price adjusted) personal spending rose 0.3 percent during the month. The increase in spending was funded by gains in nominal personal and disposable income of 0.5 percent and 0.4 percent, respectively. Real disposable income advanced 0.1 percent. The savings rate edged up by 1/10th of a percentage point to +6.2 percent. Over the past year, real disposable income has grown 2.2 percent, while real spending expanded 2.7 percent.Personal Spending 2018-9 053119

#2A revision finds Q1 economic expansion was slightly less robust than previously believed. The Bureau of Economic Analysis lowered its growth estimate of first quarter 2019 Gross Domestic Product (GDP) from a seasonally adjusted annualized rate (SAAR) of +3.2 percent to +3.1 percent. The downward revision was the result of lower than previously believed levels of business investment and private inventory accumulation. Q1 GDP growth outpaced that of the final three months of 2018 (+2.2 percent) but was slower than that of Q2 (+4.2 percent) and Q3 (+3.4 percent). Contributors to Q1 economic growth were (in declining order) personal spending (adding 90-basis points to the increase in GDP), the change in private inventories (+60-basis points), exports (+58-basis points), imports (+39-basis points), government expenditures (+42-basis points), and fixed nonresidential investment (+31-basis points). Residential fixed investment—i.e., housing—subtracted 13-basis points from Q1 GDP growth. The same report included the BEA’s first estimate of Q1 corporate profits, which sank 2.8 percent from the prior quarter. 

#3Consumer sentiment firmed in May. The Conference Board’s Consumer Confidence Index added 4.9 points during the month to a seasonally adjusted reading of 134.1 (1985=100), near its 18-year high. The present conditions index added 6.2 points to 175.2 while the expectations index grew by 3.9 points to 106.6. 38.3 percent of survey respondents described current business conditions as “good” while only 10.2 percent seeing them as “bad.” Similarly, 47.2 percent of survey respondents viewed jobs as being “plentiful” versus only 10.9 percent sensing jobs were “hard to get.” The press release stated the results “suggest no significant pullback in consumer spending in the months ahead.

#4…But one survey hints that confidence softened towards the end of the month. The Index of Consumer Sentiment from the University of Michigan came in at 100.0 (100=1966Q1), up 2.8 points from April 2019 and 2.0 points from May 2018. All of the increase came from a brighter outlook for the future as the expectations index surged by 5.9 points to 93.5 (May 2018: 89.1). The current conditions slipped 2.3 points to 110.0, which also was 1.8 points below its year-ago mark. The press release noted that even though the index had gained from April, “confidence significantly eroded in the last two weeks of May.”

#5Home purchase contract activity slowed in April. The National Association of Realtors’ Pending Home Sales Index (PHSI) pulled back 1.5 percent during the month to a seasonally adjusted reading of 104.3 (2001=100). This left the measure of contract signings of previously owned homes 2.0 percent below from its year-ago reading. The PHSI grew 1.3 percent in the Midwest but lost ground in the South (-2.5 percent), Northeast (-1.8 percent), and West (-1.8 percent). The measure had negative 12-month comparables in all four Census regions. The press release said that despite the pullback in the PHSI, “it’s inevitable for sales to turn higher in a few months.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending May 25, 2019, First-Time Claims, seasonally adjusted): 215,000 (+3,000 vs. previous week; -6,000 vs. the same week a year earlier). 4-week moving average: 216,750 (-1.5% vs. the same week a year earlier).
FHFA House Price Index (March 2019, Purchase-Only Index, seasonally adjusted): +0.1% vs. February 2019, +4.9% vs. March 2018.
Case-Shiller Home Price Index (March 2019, 20-City Index, seasonally adjusted): +0.1% vs. February 2019, +2.7% vs. March 2018.
Agricultural Prices (April 2019, Prices Received by Farmers): +1.1% vs. March 2019, +0.1% vs. April 2018. 

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

Housing Paused in April: May 20 – 24

Home sales—and overall economic activity—were sluggish in April.  Here are the five things we learned from U.S. economic data released during the week ending May 24.

#1Existing home sales slowed in April. The National Association of Realtors tells us that sales of previously owned homes slipped 0.4 percent during the month to a seasonally adjusted annualized rate (SAAR) of 5.190 million units. Sales grew 1.8 percent in the West but had slowed 4.5 percent in the Northeast and 0.4 percent in the South while holding even in the Midwest. Existing home sales were 4.4 percent below their year-ago sales pace, with negative 12-month comparables in all four Census regions. Home supplies improved a bit (but remained tight) as the count of unsold homes grew 9.6 percent to 1.830 million units. This was up 1.7 percent from a year earlier and the equivalent to a 4.2 month supply of homes. The median sales price of $267,300 represented a 3.6 percent increase over the past year. NAR’s press release noted that “job creation is improving, causing wage growth to align with home price growth, which helps affordability and will help spur more home sales.”

#2…As did new home sales. Sales of new single-family homes dropped 6.9 percent in April to a seasonally adjusted annualized rate (SAAR) of 673,000 homes, per the Census Bureau. Even with the drop, new home sales were up 7.0 percent versus a year earlier and were near a post-recession high. Sales slumped in three of four Census regions during the month: West (-8.3 percent), Midwest (-7.4 percent), and South (-7.3 percent). All four regions enjoyed positive 12-month sales comparables. There were 332,000 unsold new homes available for sale at the end of April, down 0.9 percent from March, up 11.0 percent from a year earlier, and the equivalent to a 5.9 month supply.

#3Economic activity pulled back in April. The Chicago Fed National Activity Index (CFNAI), a weighted average of 85 economic indicators indexed such that a reading 0.00 signals the U.S. economy was growing at its historical average—lost 50-basis points during the month to a reading of -0.45. Only 33 of the 85 indicators made positive contributions to the CFNAI while the other 52 made negative contributions. The contributions from three of four major categories of indicators declined during the month: production (down 40-basis points to -0.44), consumption/housing (down five basis points to a neutral contribution), and sales/orders/production (down five basis points to +0.01). Indicators tied to employment improved slightly with a one-basis point gain to +0.04. The CFNAI’s three-month moving average shed 38-basis points to -0.22, suggesting the U.S. economy was expanding at a below average rate.

#4Transportation goods—and in particular civilian craft—led to a drop in durable goods orders. The Census Bureau estimates the value of new orders of manufactured new goods slumped 2.1 percent in April to a seasonally adjusted $248.5 billion New orders for transportation goods fell 5.9 percent as civilian aircraft orders slowed 25.1 percent and motor vehicle orders declined 3.4 percent. Net of transportation goods, new orders were unchanged for the month at $163.0 billion. Rising during the month were orders for computers (+4.0 percent), electrical equipment/appliances (+0.9 percent), fabricated metal products (+0.4 percent), and machinery (+0.1 percent). New orders contracted for communications equipment (-5.5 percent) and primary metals (-0.8 percent). Also slumping was a proxy for business investment—civilian non-aircraft capital goods—as it dropped 0.9 percent.

#5Jobless claims remained relatively sparse in mid-May. The Department of Labor reports that there were a seasonally adjusted 211,000 first-time claims made for unemployment insurance benefits during the week ending May 18, down 1,000 from the prior week and 16,000 from the same week a year earlier. The four-week moving average of initial jobless claims shrank by 4,750 during the week to 220,250. While up 1.0 percent from the same week a year earlier, the measure remains close to its nearly five-decade low. 1.565 million people were receiving some form of unemployment insurance benefits during the week ending May 4, off 3.6 percent from the same week a year earlier.

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

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

Retail and Manufacturing Fail to Impress: May 13 – 17

Retail and manufacturing each stumbled in April.  Here are the five things we learned from U.S. economic data released during the week ending May 17. 

#1Retail sales wobbled in April. The Census Bureau values retail and food services sales at a seasonally adjusted $513.4 billion, down 0.2 percent from March. Sales at auto dealers/parts stores slowed 1.1 percent but grew 1.8 percent at gas stations (thanks to higher prices at the pump). Net of both of these categories, core retail sales declined 0.2 percent in April and have risen a not particularly vigorous 3.2 percent over the past 12 months. During April, sales gained at department stores (+0.7 percent), restaurants/bars (+0.2 percent), sporting goods/hobby retailers (+0.2 percent), and grocery stores (+0.2 percent), but fell at retailers focused on building materials (-1.9 percent), electronics/appliances (-1.3 percent), apparel (-0.2 percent), and health/personal care (-0.2 percent).

#2Both manufacturing and overall industrial production faltered in April. The Federal Reserve estimates industrial production dropped for the third time in four months with a seasonally adjusted 0.5 percent decline in April that left the measure up a paltry 0.9 percent over the past year. Manufacturing output also contracted by 0.5 percent during the month (also its third decrease in four months) and off 0.2 percent from a year earlier. Durable goods production slumped 0.9 percent, with drops of at least two percent for motor vehicles, machinery, and electrical equipment/appliances. The output of nondurables slowed 0.1 percent. Warmer than average April weather led to a 3.5 percent reduction in utilities’ output while mining output rose 1.6 percent, thanks to increased oil and natural gas extraction and more coal mining. 

#3Housing starts had their best month in April since last summer. The Census Bureau places housing starts at a seasonally adjusted annualized rate of 1.205 million units, up 5.7 percent from March but still 2.5 percent under from the pace of April 2018. Starts of single-family homes rose 6.2 percent to an annualized 854,000 units (its best month since January) while multi-family unit home starts edged up 2.3 percent to 359,000 (its best since last November). Permit data suggest modest growth over the near-term, as the rate of issued housing permits eked out a 0.6 percent gain to 1.96 million permits (which was 5.0 percent below the year-ago pace). Housing completions slowed 1.4 percent during the month to an annualized 1.312 million homes (+5.5 percent versus April 2018).

#4Homebuilders grew more optimistic about the housing market in May. The National Association of Home Builders’ Housing Market Index (HMI) increased by three points to a seasonally adjusted 66. This was the 59th consecutive month in which the HMI was above a reading of 50, indicating that a higher percentage of homebuilders saw the housing market as being “good” rather than being “poor.” The index improved in three of four Census regions while holding steady in the Midwest. Also moving forward during the month were indices tracking single-family home sales (up three points to 72), expected sales of single-family homes (up a point to 72), and traffic of prospective buyers (up two points to 49). The press release noted that survey respondents had “characterize[d] sales as solid, driven by improved demand and ongoing low overall supply.”

#5Small business owner sentiment firmed in April. The National Federation of Independent Business’s Small Business Optimism Index grew for the third consecutive month with a 1.7 point gain to a seasonally adjusted 103.5 (1986=100). While off from the 104.8 reading a year earlier, the index has been above 100.0 for 29 straight months. Eight of the ten index components improved from their March readings, led by earnings trends, expected credit conditions, and plans to increase inventories. The press release noted that “[t]he ‘real’ economy is doing very well versus what we see in financial market volatility.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending May 11, 2019, First-Time Claims, seasonally adjusted): 212,000 -16,000 vs. previous week; -9,000 vs. the same week a year earlier). 4-week moving average: 225,000 (+5.2% vs. the same week a year earlier).
Import Prices (April 2019, All Imports, not seasonally adjusted): +0.2% vs. March 2019, -0.2% vs. April 2018. Nonfuel Imports: -0.1% vs. March 2019, -0.9% vs. April 2018.
Export Prices (April 2019, All Exports, not seasonally adjusted): +0.2% vs. March 2019, +0.3% vs. April 2018.  Nonagricultural Exports: +0.4% vs. March 2019, +0.7% vs. April 2018.
Leading Indicators (April 2019, Index (2016=100)):  112.1 (vs. March 2019: 111.9, vs. April 2018: 109.1).
University of Michigan Consumer Sentiment (May 2019-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted): 102.4 (vs. April 2019: 97.2, May 2018: 98.0).
State Employment (April 2019, Nonfarm Payrolls, seasonally adjusted): Vs. March 2019: Up in 10 states, down in 1 state, and essentially unchanged in 39 states and the District of Columbia. Vs. April 2018: Up in 29 states and essentially unchanged in 21 states and the District of Columbia.
Business Inventories (March 2019, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.018 trillion (Unchanged vs. February 2019, +5.0% vs. March 2018).
Treasury International Capital Flows (March 2019, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): -$20.6 billion (vs. February 2019: +$52.8 billion, vs. March 2018: -$14.8 billion).

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.