US Economy March 2024

Stocks turned in their fourth consecutive winning month as investors cheered the latest rounds of economic news and corporate earnings.  
 
Consumer Spending Rises 0.2%
Consumer spending rose 0.2% in January after jumping an upwardly revised 0.6% in December. Adjusted for inflation, real consumer spending fell 0.1%. Spending on services rose 0.4% after rising 0.5% in November. Spending on goods overall fell 1.1% in January after slipping 1.9% in December. Economists had expected spending to be flat, due to the traditional “holiday hangover” and the big 0.8% drop in January’s retail sales.
 
Consumer Prices Rise 0.3%
The Consumer Price Index (CPI) rose 0.3% in January after rising 0.4% in December and holding steady for the previous two months. The increase was higher than expected. The CPI was up 3.1% year over year for the second consecutive month. Core prices were up 0.4% after being up a downwardly revised 0.2% in December instead of the 0.3% first reported and were up 3.9% year over year. The increase was higher than expected and dashed the hopes of investors who were speculating the Fed might lower rates this spring. The core CPI inflation rate peaked at a 40-year-high of 6.6% in September 2022. The personal consumption expenditures (PCE) price index rose 0.3% in January after rising 0.1% in December; core PCE rose 0.4% after rising a downwardly revised 0.1% in January. In the 12 months through January, the PCE price index increased 2.4%, the smallest increase since February 2021. Inflation peaked at 9.1% in June 2022.
 
Consumer Confidence Falls to 106.7 

• The New York-based Conference Board’s Consumer Confidence Index fell to 106.7 in February after rising to a downwardly revised 110.9 in January.*
  
• The Present Situation Index fell to 147.2 in February after rising to a downwardly revised 154.9 in January.
  
• The Expectations Index fell to 79.8 in February after rising to a downwardly revised 81.5 in January. A level of 80 or below historically indicates consumers expect a recession.
  
• Consumers are less concerned about food and gas prices but more concerned about the labor market.
  
• Consumer Confidence fell to 86.9 at the onset of the pandemic in March 2020.

*A level of 90 indicates that the economy is on solid footing; a level of 100 or more indicates growth. Analysts caution that the real driver behind consumer spending is income growth and that labor market trends are a more accurate predictor of consumer behavior.

Unemployment Rises to 3.9% 

• The unemployment rate rose to a two-year high of 3.9% at the end of February after being at 3.7% for the previous three months. Unemployment was 3.5% at the beginning of the pandemic in March 2020.
  
• The economy added 275,000 new jobs after gaining a downwardly revised 229,000 new jobs in January. It was the 38th consecutive month of job growth.
  
• Most sectors added jobs, with retailers adding 19,000 jobs and construction adding 23,000.
  
• Average hourly wages rose by just 0.1% month over month and annual wage growth was 4.3%.
  
• Unemployment has been below 4% for 25 consecutive months for the first time since 1967.

 
Chicago PMI Falls to 44
The Chicago PMI fell to a seven-month low of 44 in February after dropping to 46 in January; the PMI has fallen nearly 14 points in the past three 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 0.3%
The Producer Price Index (PPI) rose 0.3% in January after falling 0.1% in December and was up 1.0% year over year. Stripping out volatile food and energy prices, core PPI rose 0.6% in January after rising 0.2% in December and was up 0.9% year over year after being up 2.5% in December. PPI peaked at an 11.7% year-over-year increase in March 2022.
 
Q4 GDP Revised Down to 3.2%
Fourth quarter GDP growth was revised down to 3.2% from the 3.3% first reported; while the first reading was well ahead of expectations of 2.0% growth, economists had not expected GDP to be revised. The slight downward revisions were primarily due to downward revisions in personal income and savings and less business investment in inventories. Consumer spending was revised up from 2.8% growth to 3.0%. The core PCE deflator, which Fed officials view as the best measure of the underlying pace of consumer price inflation, rose slightly more than initially reported, coming in at 2.1% instead of 2.0%.
 
GDP will rise about 2.2% this year, according to the latest upwardly revised forecast from the National Association of Business Economists. The Fed expects GDP to rise about 1.4% this year but may raise their forecast at their next meeting in light of recent economic news. 

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