Economic data this week covered the consumer, industrial space and housing market, and continue to suggest the U.S. economy is only gradually losing momentum. We still view a recession is more likely than not by the end of the year, but there is no denying the underlying resiliency evident in the data.
For starters, consumers continue to spend. Retail sales rose 0.4% in April, and the control group measure, which excludes volatile categories, posted its second-largest gain in seven months. This measure feeds directly into the BEA's calculation of PCE in the GDP accounts and suggests consumer spending started the quarter on the right foot. But details were a bit mixed under the hood with only seven of the 13 retailer categories reporting a rise in April sales. Auto sales surprised to the downside, as previously released data on wholesale auto sales suggested a surge in April sales. As the following chart shows, in adjusting sales for inflation, the trend in sales has broadly moved sideways in recent months.
Like retail, auto sales played a role in manufacturing activity as well. Motor vehicle and parts production surged more in April alone than it did over the course of the past 12 months. Autos accounted for more than half of the 1% gain in April manufacturing. Excluding autos, manufacturing still rose by the most in four months and helped lift industrial production (IP). But after factoring in downward revisions to the prior two months, the level of IP was more or less in line with what was expected, which is to say essentially flat. IP is now roughly consistent with where it stood six months ago, signaling some stabilization in production after a weak start to the year.
Housing data also demonstrate some recent stabilization. Builder sentiment reached a 10-month high in May, according to the NAHB index, as buyer demand recovers and incentives are reigned in. Increased confidence is translating to activity. Total housing starts rose 2.2% to a 1.4 million-unit pace in April, with both single-family and multifamily starts advancing at a solid pace. Single-family construction now appears to be on the rebound, driven largely by a jump in construction in the West. Permits also notched a solid gain for single-family structures, though multifamily permits notched their second-straight decline and are on the slowest pace since July 2021. The pullback in multifamily permits comes as the apartment market begins to cool with a flood of new supply set to be delivered.
Existing home sales dipped 3.4% to a seasonally adjusted pace of 4.28 million in April, dropping for the second month in a row (chart). Low inventory and high mortgage rates continue to constrain the resale market. The drop in resales was broad-based as single-family homes, condos and co-ops all posted declines on the month. Existing sales weakened across nearly every region, with much of the weakness concentrated in the West. Despite the dip in the headline number, the sector may be stabilizing, as resales in April are now 7.0% above their recent low in January
Meanwhile, despite incoming data demonstrating an underlying resilience in economic growth, the Leading Economic Index (LEI) continues to show clear signs of recession. April marks the 10th straight month in which the six-month average change in the Leading Economic Index has been below a key recession threshold. We ultimately still expect the U.S. economy to slip into a mild recession before year-end as tighter policy weighs on activity and firms' ability to hire.
This Week's State Of The Economy - What Is Ahead? - 05 February 2021
Wells Fargo Economics & Financial Report / Feb 10, 2021
Nonfarm employment rebounded in January, with employers adding 49,000 jobs following the prior month\'s 227,000-job drop.
This Week's State Of The Economy - What Is Ahead? - 15 April 2022
Wells Fargo Economics & Financial Report / Apr 18, 2022
What do pollen and the Consumer Price Index (CPI) have in common? Answer; both are hitting new highs. This week’s U.S. economic data was led by the largest month monthly increase in the Consumer Price Index (CPI) since September 2005.
This Week's State Of The Economy - What Is Ahead? - 17 January 2020
Wells Fargo Economics & Financial Report / Jan 18, 2020
Mild weather helped housing starts surge 16.9% in December to a 1.61 million-unit pace, the highest in 13 years. Manufacturing surveys from the New York Fed and Philadelphia Fed both rose more than expected in December.
This Week's State Of The Economy - What Is Ahead? - 13 October 2023
Wells Fargo Economics & Financial Report / Oct 13, 2023
The Consumer Price Index (CPI) rose 0.4% in September, a monthly change that was a bit softer than the 0.6% increase registered in August. The core CPI rose 0.3% during the month, a pace unchanged from the month prior.
This Week's State Of The Economy - What Is Ahead? - 15 December 2023
Wells Fargo Economics & Financial Report / Dec 21, 2023
core CPI remained elevated in November at a 4.0% annual rate, a string of slower monthly prints suggests that disinflation has more room to run.
This Week's State Of The Economy - What Is Ahead? - 22 October 2021
Wells Fargo Economics & Financial Report / Oct 25, 2021
Restrictions from a renewed COVID outbreak in China, regulatory changes weighing on local financial markets and a potential collapse of Evergrande have all contributed to a slowdown in Chinese economic activity.
This Week's State Of The Economy - What Is Ahead? - 18 November 2022
Wells Fargo Economics & Financial Report / Nov 21, 2022
The resiliency of the U.S. consumer was also on display, as total retail sales increased a stronger-than-expected 1.3% in October, boosted, in part, by a 1.3% jump in motor vehicles & parts and a 4.1% rise at gasoline stations.
This Week's State Of The Economy - What Is Ahead? - 18 October 2019
Wells Fargo Economics & Financial Report / Oct 19, 2019
Personal consumption is still on track for a solid Q3, but retail sales declined in September for the first time in seven months.
This Week's State Of The Economy - What Is Ahead? - 04 March 2022
Wells Fargo Economics & Financial Report / Mar 08, 2022
February\'s employment data showed the economy had strong momentum, but that seems pretty dated now with Russia\'s invasion of Ukraine and the Fed\'s shift to a more hawkish tone on monetary policy.
This Week's State Of The Economy - What Is Ahead? - 03 September 2021
Wells Fargo Economics & Financial Report / Sep 10, 2021
e move into the Labor Day weekend celebrating the 235K jobs added in August, while simultaneously lamenting that it was about half a million jobs short of expectations.
