*adjusted for inflation
According to American Chemistry Council (ACC) Weekly Chemistry & Economic Trends report on May 26, 2023, the number of new jobless claims rose by 4,000 to 229,000 during the week ending May 20. Continuing claims fell by 5,000 to 1.79 million, and the insured unemployment rate for the week ending May 13 was unchanged at 1.2%.
Consumer spending increased by 0.8% in April, a strong pace following two months of modest 0.1% gains. Both goods and services spending rose. Led by gains in rental income and compensation (private wages and salaries), personal income increased again in April and was 0.4% higher. With spending moving faster than income gains, the personal savings rate came down from 4.5% to 4.1% in April. The price index for personal consumption expenditures (PCE) had been easing so for this year but ticked up from a 4.2% Y/Y pace in March to a 4.4% Y/Y pace in April. The Fed looks at the “core” PCE price index as it targets a lowering inflation. The core index excludes food and energy. The core index has hovered around a 4.6-4.7% Y/Y pace and rose from 4.6% to 4.7% in April. This latest news suggests persistent inflation and could mean continued monetary tightening moves by the Fed.
A large gain in defense capital goods orders boosted headline durable goods orders, which rose 1.1% in April. Core business goods orders were up 1.4% in April, interrupting a string of monthly declines as slowing demand for goods has been dampening business investment in capital equipment. Headline orders were up 2.6% Y/Y while core business orders were ahead 2.7% Y/Y.
New home sales rose for a second month in April, up by 4.1% in April. Sales activity rose in the Midwest and South regions, offsetting declines in the rest of the country. Inventories of new homes available for sale also edged higher. As sales growth outpaced growth in inventories, the months’ supply moved lower from 7.9 in March to 7.6 in April, the lowest in a year. With extremely low inventories of existing homes, due to homeowners’ reluctance to give up low mortgage rates, there has been renewed activity in newly built homes. New home sales were up 11.8% Y/Y.
The second estimate of real GDP showed an annual growth rate of 1.3% in the first quarter of 2023, slightly higher than the first estimate released last month. Increases in consumer spending, exports, government spending and nonresidential fixed investment were offset by decreases in private inventory investment and residential fixed investment. Imports also increased. Fourth quarter GDP was revised upward to 2.6%. 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 3.9% in Q4. Excluding food and energy prices, the PCE price index increased 5.0% in Q1 compared to 4.4% in Q4.
ACC SURVEY OF FORECASTERS – GLOBAL
The outlook for the global economy is for continued weakening through this year. The global economy is forecast to expand about 2.3% in 2023. Growth will pick up only modestly in 2024 to a 2.6% pace.
Global supply chains are functioning with more ease. That has helped some key markets like autos but, for the most part, easing supply chain pressures have presented as overall goods demand has weakened which has lowered traffic volume. Export demand has softened, somewhat explained by factors including inflation and consumers turning inward toward domestic endeavors and towards services (over goods). World trade growth will lag overall economic growth this year before a modest rebound in 2024.
Monetary policy efforts around the world have continued to aggressively target lowering inflation. Pressures persist and some areas are proving sticky. As it shakes out, however, global inflation is edging down, albeit stubbornly. Following an 8.1% pace in 2022, inflation growth will moderate to a 5.9% pace in 2023 and further to 4.2% in 2024. Global inflation is forecast to settle down to just 3% average growth by the end of 2031.
Global manufacturing activity has slowed down notably from a 2.9% pace in 2022 and will gain just 0.3% in 2023. In many sectors, manufacturers are working down inventories. Weaker demand for goods will pace the flow of new orders for production. Higher interest rates will discourage new investments and demand for related materials especially in interest rate sensitive end-use markets like building and construction. Forecasters anticipate some output performance diversity across sectors and regions. Manufacturers in the auto supply chain will benefit from the rebuilding occurring in that sector.
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ACC_EconomicsDepartment@americanchemistry.com
American Chemistry Council
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