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Kathianne
06-03-2024, 11:26 AM
Sigh.

https://www.wsj.com/economy/central-banking/the-fed-might-soon-have-to-worry-about-more-than-just-inflation-a31c1464?st=upwjnp3dtej087f&reflink=desktopwebshare_permalink


The Fed Might Soon Have to Worry About More Than Just InflationAs evidence mounts that the economy is slowing, pressure to lower rates could build
By
Aaron Back
Follow
June 1, 2024 5:30 am ET



The Federal Reserve last year raised its benchmark rate to its highest level since 2001 and has kept it there since. PHOTO: VALERIE PLESCH/BLOOMBERG NEWS
The U.S. economy continues to lose momentum. Growth hasn’t yet slowed to the point that it would be a concern to policymakers, but it might soon if current trends continue.


Investors’ attention on Friday was initially focused on the personal-consumption expenditures price index, part of a package of data released by the Commerce Department. That makes sense since it is the Federal Reserve’s preferred measure of inflation and will help them decide whether or not to cut rates before November’s U.S. presidential election. But accompanying data on underlying economic activity turned out to be more significant.


The PCE price index rose 2.7% from a year earlier in April, in line with economists’ expectations and unchanged from the prior month. The core PCE price index that strips out food and energy, which the Fed favors, was up 2.8%, a tad more than expected.


More noteworthy were the figures for personal income and consumption. Incomes rose 0.3% from the preceding month, in line with expectations and down from 0.5% growth in March. Personal spending rose just 0.2%, below expectations and slowing from 0.7% in March. In real, inflation-adjusted terms consumption and disposable incomes both fell 0.1%.


It seems that the cumulative impact of years of inflation is finally catching up with consumers and eroding their savings cushion—something that companies selling discretionary goods from Starbucks to Kohl’s are saying in their public reports. BMO Capital Markets Chief Economist Scott Anderson noted that April’s savings rate of 3.6%, while unchanged from March, was well below the 12-month average of 5.2%.


Also on Friday, the Chicago Business Barometer, also known as the Chicago purchasing managers index and a gauge of economic activity in the region, fell to 35.4 in May from 37.9 in April. The importance of regional PMIs shouldn’t be exaggerated, but this one seemed more noteworthy than most. It was at its lowest since May 2020, during the lockdown period of the pandemic, according to FactSet.


All those readings came on the heels of a downward revision in first-quarter gross domestic product growth on Thursday, to an annualized 1.3% from an earlier estimate of 1.6%. It was mainly driven by a declining estimate of consumption, again suggesting a flagging consumer. In a note, economists at Capital Economics said they are now expecting growth of just 1.2% in the second quarter, down from an estimate of 2.7% a couple of weeks ago.


In short, signs of a slowdown are becoming hard to ignore. This may not start to influence the calculations of the Fed until it shows up more strongly in the monthly payroll numbers. Those showed some slowing in April but, at 175,000 jobs added, was still decent. The report on May will be released on Friday.


But developments in the labor market are famously a lagging indicator, meaning they show up later than other signs when an economic shift occurs. The early signals are already here.

fj1200
06-03-2024, 12:43 PM
I still think the economy has been surprisingly resilient and will remain so. I could very well be wrong.

Gunny
06-03-2024, 05:16 PM
I still think the economy has been surprisingly resilient and will remain so. I could very well be wrong.I agree it has been surprisingly resilient, as I watch the rubber band stretch. It's only going to stretch so far.

Kathianne
06-03-2024, 05:26 PM
I agree it has been surprisingly resilient, as I watch the rubber band stretch. It's only going to stretch so far.

My fear. Food prices! Yowser!

Gunny
06-03-2024, 05:30 PM
My fear. Food prices! Yowser!Everything prices. Getting ridiculous.

SassyLady
06-03-2024, 09:37 PM
Car insurance is hitting pretty hard as well.