According to American Chemistry Council (ACC) Weekly Chemistry & Economic Trends report on April 28, 2023, the number of new jobless claims fell by 16,000 to 230,000 during the week ending April 22. Continuing claims fell by 3,000 to 1.86 million, and the insured unemployment rate for the week ending April 15 was unchanged at 1.3%.
Tapped out consumers held tight in March with no change in consumer spending. Rising consumption of services was offset by continued declines in spending on goods. Aggregate personal income (the ability to spend) continued to expand, up 0.3%, reflecting higher employee compensation and rental income. The implied savings rate rose to 5.1%, the highest in more than a year. The price index for personal consumption expenditures (PCE) slowed to a 4.2% Y/Y pace, down from 5.1% in February. Prices for durable goods continued to ease (down four of the past five months) as consumers shift away from those purchases. Excluding food and energy, the core PCE price index rose at a 4.6% annual pace, down slightly from 4.7% in February. It is this core PCE price index that the Fed is targeting with its program of interest rate hikes and unwinding its balance sheet. Following nine consecutive rate increases, core inflation remains persistently strong. The Fed meets again next week to consider its next move.
The Conference Board Consumer Confidence Index® fell to 101.3 in April (from 104.0 in March). Consumers’ assessment of present economic and labor market conditions increased while their expectations for the short-term outlook fell sharply. The expectations index remains below 80 and has been there for 13 of the last 14 months. Although consumers’ assessment of the current business environment improved somewhat in April, their expectations fell and remain below the level which often signals a recession looming in the short term. Plans for major purchases such as homes, autos, appliances, and vacations all declined in April, a signal that consumers may be economizing amid growing pessimism.
New home sales rose for a fourth straight month in March, up by 9.6%. Sales were down 3.4% Y/Y, however. Higher sales in the Northeast, Midwest, and West offset declines in the South. The inventory of new homes declined from 8.4 months of supply in February to 7.6 in March. The median price for a new home rose 3.2% Y/Y continuing a slowing pace of gains.
Real GDP increased at an anemic 1.1% pace in Q1 2023 compared to a 2.6% increase in Q4 2022. The deceleration in real GDP growth in Q1 is due primarily to reduced private inventory investment (particularly wholesale trade and manufacturing) and a slowdown in nonresidential fixed investment. The annual growth of the personal consumption expenditure (PCE) index—a primary inflation index—increased 4.2%, compared to 3.7% in Q4. Excluding food and energy prices, the PCE price index increased 4.9% compared to 4.4% in Q4.
Sharply stronger aircraft orders boosted headline durable goods orders, which rose 3.2% in March. Core business goods, however, fell 0.4%, the fourth decline in the past five months, as slowing demand for goods dampens business investment in capital equipment. Compared to a year ago, headline orders were up 5.4% Y/Y while core business orders were ahead 1.9% Y/Y.
An early look into manufacturing activity for April, the Chicago Business Barometer® moved higher again to 48.6. Despite the better-than-expected gain, the below-50 reading indicates manufacturing activity contracted for an eighth consecutive month.
Manufacturing conditions worsened in Texas during April according to the Dallas Fed’s Texas Manufacturing Outlook Survey. The general business activity composite index fell another 7.7 points to -23.4 with deterioration in new orders, unfilled orders, shipments, and finished goods inventories. Production expanded only slightly compared to March. Looking ahead six months, pessimism grew with the future business activity index down 5.4 points to -16.6. The April manufacturing survey from the Richmond Fed indicated deteriorating business conditions overall, with declining shipments and new orders and increasing employment. Expectations for six months ahead were slightly more negative.
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