 Stocks got back into the black in May, with markets settling down as some signs of inflation cooled. The DOW briefly crossed the historic high of 40,000 but settled back down before the end of the month. Consumer Spending Rises 0.2% Consumer spending inched up 0.2% in April after rising 0.8% for the previous two months. Adjusted for inflation, real consumer spending rose 0.5% in March and spending for February was revised from a gain of 0.4% to 0.5%. Disposable household income after accounting for inflation and taxes rebounded 0.2% after slipping 0.1% in February. Consumers saved less and also tapped into savings. The saving rate fell to a 16-month low of 3.2% from 3.6% in February. But economists say they are not concerned, as the low savings rate reflects healthy household balance sheets and reasonable confidence in the future. Consumer Prices Rise 0.3% The Consumer Price Index (CPI) rose 0.3% in April after rising 0.4% in February and March and year-over-year inflation slowed to 3.4% in April from 3.5% in March. The slowdown was in line with expectations. Core prices rose 0.3% in April after rising 0.4% for the past three consecutive months and were up 3.6% year over year after rising 3.8% year over year in March. Results were in-line with expectations and cheered markets. The core CPI inflation rate peaked at a 40-year-high of 6.6% in September 2022. The personal consumption expenditures (PCE) price index, the Fed’s preferred measure of inflation, rose 0.3% in April for the third consecutive month and was up 2.7% year over year, a slight cooldown from 2.8% in March. Consumer Confidence Rises to 102.0 
Unemployment Rises to 4.0% 
Chicago PMI Falls to 35.4 The Chicago PMI fell to 35.4 in May after falling to 37.9 in April and a seven-month low of 41.1 in March. Economists had expected the PMI to climb to 41.6. The Index has been below the break-even midpoint of 50 for the past 20 months. Looking back to when the series began in 1967, the PMI has ranged from 20.7 in June 1980 to 81.0 in November 1973. Wholesale Prices Rise 0.5% The Producer Price Index (PPI) rose 0.5% in April after rising 0.2% in March and was up 2.2% year over year, well above expectations. Stripping out volatile food and energy prices, core PPI rose 0.5% in April after rising 0.2% in March and was up 2.4% year over year. Both increases were well above expectations. PPI peaked at an 11.7% year-over-year increase in March 2022. Q1 GDP Revised Down to 1.3% First quarter 2024 GDP was revised down to 1.3% growth from the 1.6% first reported. The major culprit was a big downward revision in consumer spending on goods, which was originally reported to have contracted 0.4% on an annualized basis. Goods spending is now estimated to have contracted at an 1.9% annualized rate including a 4.1% contraction in durable goods outlays and a 0.6% annualized drop in non-durable goods spending. The much larger services category was barely changed and grew at a 3.9% annualized rate in Q1, down marginally from 4.0% previously. The continued resilience in services outlays complicates the Federal Reserve's efforts to bring down the inflation rate in the service sector. Fed Holds Rates Steady The Fed held interest rates between 5.25% and 5.5% for the sixth consecutive meeting at their latest policy meeting May 1. Citing a lack of "further progress" in returning inflation to 2%, the FOMC voted unanimously to keep rates on hold for now. Analysts believe the Fed will need greater confidence that inflation is returning to 2% on a sustained basis before they feel comfortable lowering rates and consensus is that will not happen until their meeting in mid-September at the earliest. © Robert Bosch Tool Corporation. All rights reserved, no copying or reproducing is permitted without prior written approval.
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