Economic indicators are released every week to provide insight into the overall health and performance of an economy. They serve as essential tools for policymakers, advisors, investors, and businesses because they allow them to make informed decisions regarding business strategies and financial markets. In the week ending on May 30th, the SPDR S&P 500 ETF Trust (SPY ) fell 0.64% while the Invesco S&P 500® Equal Weight ETF (RSP ) was down 0.75%.
This article examines three important economic releases from the past week: personal consumption expenditures (PCE), gross domestic product (GDP), and consumer confidence. These indicators provide insights into the country’s economic landscape, with a particular focus on consumption and consumer attitudes. By understanding consumers’ attitudes towards the economy, we can gauge their spending patterns, which significantly drive overall economic growth.
Personal Consumption Expenditures (PCE)
The Fed’s preferred inflation gauge rose at its slowest monthly rate of the year in April. The Core PCE Price Index, which measures inflation excluding volatile food and energy prices, rose by 2.8% compared to the previous year, unchanged from March. Core PCE has been flat over the past few months but still sits at its lowest level since March 2021. Additionally, headline PCE was also flat, remaining at 2.7% in April, as expected. On a monthly basis, headline and core PCE rose 0.3% and 0.2% from March, respectively. Both monthly increases are the slowest growth for each series so far this year. While the latest PCE numbers came in as expected, inflation continues to prove sticky as it has remained within a narrow range over the past several months. The Fed will most likely continue to remain patient with their first rate cut as they need clearer evidence that inflation is progressing towards their 2% target.
Gross Domestic Product (GDP)
The U.S. economy grew at its slowest pace in almost two years, according to the second estimate for Q1 2024 Gross Domestic Product (GDP). The economy expanded at a rate of 1.3%, a significant slowdown from 3.4% in Q4 of last year and less than the initial estimate of 1.6%. While the economy has expanded over the last seven quarters, the latest figure marks the slowest pace of growth over that same period.
In the first quarter, three out of the four subcomponents contributed positively to real GDP. Consumer spending was the largest contributor to last quarter’s economic growth, however, was the main cause of this month’s downward revision. Business investment and government spending also made positive contributions and were practically unchanged from the initial estimate. Net exports were the sole negative contributor last quarter as imports, which are a subtraction in the calculation of GDP, increased.
Consumer Confidence Index
U.S. consumer confidence bounced back this month following three straight monthly declines, as the Conference Board Consumer Confidence Index® rose to 102.0 from a upwardly revised 97.5 in April. Despite the uptick, the latest reading is the index’s second lowest level over the last six months. Consumers reported gas and grocery prices remain a top concern, followed by elevated interest rates and potential recession fears.
The index is based on a monthly survey measuring consumer attitudes about current and future economic conditions, with a particular focus on employment and labor market conditions. The overall improvement this month is largely reflected in a recovery to the expectations index in which fewer consumers expect deterioration in future business conditions, future job availability and future incomes. Additionally, consumers’ confidence levels in the present situation improved slightly thanks to increased optimism regarding labor market conditions.
The Consumer Discretionary Select Sector SPDR ETF (XLY ) is tied to consumer confidence.
Economic Indicators and the Week Ahead
The labor market will take center stage this week as several key job reports will be released. The April JOLTS data and May employment reports will provide insights into the health of the labor market, a crucial component of the overall economy. The labor market has been, and will continue to be, closely watched as it is one of the key elements driving the Federal Reserve’s policy decisions.
On Tuesday, the Bureau of Labor Statistics (BLS) will release the latest job openings data. Then on Wednesday, ADP will release their latest employment report that will set the stage for the more comprehensive BLS employment report due on Friday.
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