Consumer spending on goods outpaced services in April.
While much of the focus lately has been on potential “black swan” events such as an escalating banking crisis or a U.S. default on its debt, actual economic data continues to show a resilient U.S. economy. Indicators released this week concerning April activity were almost uniformly stronger than March.
Consumer spending
Adjusted for inflation, real consumer spending increased 0.5%, seasonally adjusted, in April after holding steady in March. Real spending was up 2.3% y/y and 8.2% ahead of the pre-pandemic month of February 2020.
For the second time this year, spending on goods outpaced spending on services. Real spending on goods rose 0.8% while real spending on services ticked up 0.3%. Spending on goods rose 1.5% y/y and 17% versus February 2020. Services spending rose 2.7% y/y but only 4.3% versus February 2020.
Fueled primarily by motor vehicle sales, real spending on durable goods rose 1.4%. Spending had been down 1.1% in each of the prior two months, but durable goods spending had jumped 6.9% in January. Real spending on durable goods was 2.6% higher than April 2022 and nearly 29% higher than February 2020.
Real spending on non-durable goods increased 0.4% in April. Spending was up just 0.8% y/y but was nearly 11% higher than February 2020.
The Bureau of Economic Analysis updated earlier estimates of personal income and spending for October through March, and one of the consequences of was a downward revision in the personal savings rate. The initial March estimate had been a 5.1% savings rate, which is well below the typical 7% to 9% during the 2010s. In the latest data, the savings rate in April was 4.1%, down from 4.5% in March.
Durable goods orders
As frequently happens, aircraft distorted the overall figures for manufacturing orders in April. Total new orders for durable manufactured goods rose 1.1%, seasonally adjusted, but a jump in orders for defense aircraft and parts of nearly 33% more than accounted for the gain. Excluding transportation equipment, new orders declined 0.2%.
Although durable goods orders were broadly weak, new orders for core capital goods – nondefense capital goods excluding aircraft – increased 1.4%, which is the strongest gain since December 2021.
New orders for core capital goods were more than 21% higher than they were in February 2020, but the Census Bureau data is not adjusted for pricing. FTR’s adjustment of the data by the Producer Price Index for private capital equipment shows that inflation-adjusted orders are only slightly higher than they were in that pre-pandemic month.
Sales of new homes
Sales of new single-family homes rose by a solid 4.1% m/m in April, but that gain followed a downward revision of the preliminary March estimate. The annualized rate of 683,000 new homes for April was the same as initial March figure.
New-home sales have now risen m/m in six of the past seven months and were up 11.8% y/y in April. Sales had not seen a positive y/y comparison since February 2022, and that one was only 1%.
The supply of new homes at current sales rate continues to fall from the post-Great Recession highs seen in the second half of 2022. The 7.6 months’ supply is still high compared to the typical inventory levels in the 2010s.
The median price of a new home sold in April fell 7.7% to $420,800, which is down more than 15% from the record level in October of last year but still nearly 27% higher than the median new-home price in February 2020. Home prices in general have been easing, which should help generate additional sales. However, as noted last week the median existing-home price increased slightly in April.
Retail inventories
Advance figures show that total retail inventories barely budged in April, ticking up just 0.2%, seasonally adjusted. However, retail inventories of motor vehicles and parts rose 1.2%, which is not surprising given the spike in automotive production in April as we discussed last week. Excluding motor vehicles and parts, retail inventories eased 0.1% in April.
Preliminary estimates show little change in inventories relative to sales. The inventories-to-sales ratios for total retail and for retail excluding automotive each ticked down a tenth of a point. Although retail automotive inventories are far less lean than they were a couple of years ago, they are still far leaner than they were before the pandemic. The ratio for retail excluding motor vehicles and parts, however, has largely normalized, however.
Diesel and petroleum prices
The national average price of diesel declined 1.4 cents to $3.883 a gallon during the week ended May 22 for the fifth straight decrease and the 15th decrease in the past 16 weeks. The average price is down just under 74 cents during those 16 weeks.
Average prices declined in all regions except for California, where prices were unchanged. In a few cases, though, the decreases were marginal, such as in the Rocky Mountain region where prices declined just a tenth of a cent on average.
Based on the relatively small decreases in the past couple of weeks diesel prices seem to be settling. Underlying factors that typically drive diesel prices are mixed. Crude prices are stable with West Texas Intermediate trading in the low $70s per barrel.
The latest week brought tighter distillate inventories, however. U.S. distillate stocks are at their lowest levels since October. As noted last week, the principal culprit is the Midwest. Distillate stocks in that region fell further in the latest week and are now at their lowest level since November 2017.
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