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.

The Trade Deficit Narrowed in November as Exports and Imports Both Fell: Week of February 4 – 8

The trade deficit shrank in November, as had factory orders. Here are the five things we learned from U.S. economic data released during the week ending February 8.  

#1The trade deficit narrowed in November. The Census Bureau and the Bureau of Economic Analysis estimates export activity slowed $1.3 billion to $209.9 billion (+3.7 percent versus November 2017) while imports fell by $7.7 billion to $259.2 billion (+3.2 percent). The resulting trade deficit of -$49.3 billion was down $6.4 billion from October but 0.7 percent larger than that of a year earlier. The goods deficit contracted by $6.7 billion to -$71.6 billion while the services surplus shrank by $0.3 billion to +$22.3 billion. The former was the result a $7.9 billion drop in imported goods, including steep declines for consumer goods (including cell phones) and industrial supplies/oil. The U.S. had its biggest goods deficits in November with China (-$35.4 billion, down $2.8 billion from October), the European Union (-$13.8 billion), Mexico (-$6.8 billion), and Japan (-$5.7 billion).

#2Factory orders slowed for a second consecutive month in November. The Census Bureau estimates new orders for manufactured goods declined by $3.1 billion during the month to a seasonally adjusted $499.2 billion. This was 4.1 percent greater than the value of November 2017 factory orders. Transportation goods orders grew 3.0 percent, boosted by strong gains for ships/boats (+72.6 percent), defense aircraft (+31.2 percent), and civilian aircraft (+6.9 percent). Net of transportation goods, core factory orders dropped 1.3 percent following a 0.2 percent gain in October. While orders grew for fabricated and primary metals (+0.9 percent and +0.8 percent, respectively), they slowed for nondurable goods (-1.9 percent), machinery (-1.7 percent), electrical equipment/appliances (-1.1 percent), and computers/electronics (-0.3 percent). New orders for civilian capital goods orders net of aircraft (a proxy for business investment) slumped 0 6 percent in November. 

#3Service sector activity remained strong, but softened, in January. The NMI, the headline index from the Institute for Supply Management’s Nonmanufacturing Report on Business slipped by 1.3 points during the month to a reading of 56.7. Even with the pullback, the NMI has been above a reading of 50.0 for 108 consecutive months, indicative of an expanding service sector. Only one of the NMI’s four components grew during the month, with employment adding 1.2 points to 57.8. Shedding points from December were components for new orders (down 5.0 points to 57.7) and business activity/production (down 1.5 points to 59.7. Holding firm was the measure for supplier deliveries at a reading of 51.5. Only 11 of 18 tracked nonmanufacturing industries expanded during the month, however, with the most robust expansion reported in transportation/warehousing, health care/social assistance, and mining. The press released noted continued optimism but also stated that “[r]espondents are concerned about the impacts of the government shutdown.

#4Manufacturing sector productivity edged up during Q4 2018. The Bureau of Labor Statistics tells us that manufacturing productivity grew 1.3 percent on a seasonally adjusted annualized basis during the final three months of 2018, an improvement from Q3’s 1.1 percent gain. Manufacturing output had expanded 2.3 percent, supported by a 1.0 percent advance in hours worked. The productivity gain for the past year was much softer, with a 0.7 percent increase. During Q4, durable manufacturing productivity increased 2.6 percent while the productivity improvement for nondurable manufactured goods was 1.2 percent. (The BLS was unable to report on overall productivity for the U.S. economy due to the partial government shutdown.)

#5Consumers took on credit at a marginally slower pace in December. American households had $4.010 trillion in outstanding consumer debt (not including mortgages and other real estate-backed loans) in December, according to the Federal Reserve. This was up $16.5 billion from November (smaller than the prior month’s $22.4 billion gain) and a 12-month increase of 4.7 percent. Consumers had $1.045 trillion in outstanding revolving credit balances at the end of December, up $1.7 billion for the month and 2.0 percent from a year earlier. Nonrevolving credit balances expanded $14.9 billion to $2.966 trillion (+5.6 percent versus December 2017).

Other U.S. economic data released over the past week:
Jobless Claims (week ending February 2, 2019, First-Time Claims, seasonally adjusted): 234,000 (-19,000 vs. previous week; +11,000 vs. the same week a year earlier). 4-week moving average: 224,750 (-1.4% vs. the same week a year earlier).
Senior Loan Officers Survey (January 2019)

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

The Trade Deficit Shrinks, Job Openings Expand: June 4 – 8

The trade deficit narrowed while employers sought even more workers. Here are the five things we learned from U.S. economic data released during the week ending June 8.

#1A small rise in exports leads to a smaller trade deficit in April. The Census Bureau and Bureau of Economic Analysis find exports grew by $0.6 billion during the month to $211.2 billion (+9.9 percent versus April 2016) while imports contracted by $0.4 billion to $257.4 billion (+8.0 percent versus April 2016). As a result, the trade deficit narrowed to its lowest level since last September at -$46.2 billion. The goods deficit shrank by $1.0 billion to -$66.3 billion while the services surplus essentially held steady at +$22.1 billion. The latter was pushed up by a $0.3 billion gain in exported goods (led by industrial supplies, food/beverages) and a $0.7 billion drop in imported goods (driven by a $2.8 billion decline for consumer goods and a $0.9 billion drop for automobiles). The U.S. had its largest goods deficits with China (-$30.8 billion), European Union (-$13.2 billion), Mexico (-$6.0 billion), Japan (-$5.9 billion), and Germany (-$5.6 billion).Trade Deficit 060818

#2There were more job openings in April than the number of people unemployed. The Bureau of Labor Statistics reports that there were a seasonally adjusted 6.698 million job openings at the end of April, up 65,000 for the month, 9.7 percent from a year earlier, and the most in the 17+ year history of the data series. Further, there were more job openings at the end of the more than that were people unemployed (6.346 million). The number of private sector job openings has grown 10.0 percent over the past year to 6.117 million, with large 12-month comparables for transportation/warehousing (+46.2 percent), professional/business services (+22.9 percent), retail (+22.5 percent), manufacturing (+20.9 percent), and leisure/hospitality (+11.0 percent). Employers hired 5.578 million workers during the month, up 92,000 from March and 6.8 percent from a year earlier, with private sector hiring also rising 6.8 percent from April 2017 levels. 5.408 million people left their jobs during April, up 86,000 for the month and 5.8 percent from a year earlier. This number includes 3.387 million people who had voluntarily quit their jobs (+1.4 percent versus April 2017).

#3The service sector grew even hotter in May. The Institute for Supply Management’s NMI jumped by 1.8 points during the month to a seasonally adjusted reading of 58.6. This was the 100th straight month in which the measure has been above a reading of 50.0, indicative of an expanding service sector. All four components of the NMI improved from their April readings: supplier deliveries (+4.0), business activity/production (+2.2), new orders (+0.5), and employment (+0.5). Fourteen of 18 tracked service sector industries expanded during May, led by wholesale trade, mining, and real estate. The press release expressed optimism among survey respondents, but also noted some “concerns about the uncertainty surrounding tariffs, trade agreements and the impact on cost of goods sold.”

#4Fewer aircraft orders slowed factory orders in April. New orders for manufactured goods dropped 0.8 percent during the month to a seasonally adjusted $494.5 billion. This represented a 7.4 percent year-to-year increase for the Bureau of Labor Statistics measure. As we saw with the durable goods report a few weeks ago, the headline number was dragged down by a 28.9 percent drop in orders for civilian aircraft. Net of all transportation goods, factory orders gained 0.4 percent during the month and has grown 7.4 percent over the past year. Increasing during the month were orders for furniture (+2.2 percent), fabricated metal products (+1.8 percent), electrical equipment/appliances (+1.8 percent), primary metals (+1.4 percent), computers/electronics (+1.1 percent), motor vehicles (+1.0 percent), and nondurable goods (+0.1 percent). Shipments eked out a less than $0.1 billion gain to $492.8 billion (+7.2 percent versus April 2018) with shipments net of transportation goods up 0.4 percent for the month. Unfilled orders grew for the fifth time in six months (+0.5 percent to $1.153 trillion) while inventories expanded for the 18th straight month (+0.3 percent to $666.9 billion).

#5Productivity was more feeble during Q1 than previously believed. The Bureau of Labor Statistics estimates nonfarm productivity grew 2.7 percent on a seasonally adjusted annualized basis (SAAR) while hours worked grew 2.3 percent during the first three months of 2018. As a result, nonfarm productivity 0.4 percent during the quarter, down from the 0.7 percent previously estimates and below the 1.3 percent productivity growth rate during the final three months of 2017. Nonfarm productivity has grown 1.3 percent over the past year. Manufacturing sector productivity contracted 1.2 percent during the quarter, sharply down from a 0.5 percent gain previously reported. Even with the pullback during Q1, manufacturing sector productivity has surged 4.3 percent over the past year.

Other U.S. economic data released over the past week:
Jobless Claims (week ending June 2, 2018, First-Time Claims, seasonally adjusted): 222,000 (-1,000 vs. previous week; -12,000 vs. the same week a year earlier). 4-week moving average: 225,500 (-7.4% vs. the same week a year earlier).
Consumer Credit (April 2018, Outstanding Consumer Credit Balances (net of mortgages and other real estate backed loans, seasonally adjusted): $3.883 trillion (+$9.2 billion vs. March 2018, +4.8% vs. April 2017).

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