Economic News in Review Greenville SC
Here is last week’s Economic News in Review Greenville SC.
Last week saw incomes increase, while spending posted an unexpected drop, and jobless claims enjoyed a better-than-expected drop, but a drop in the first quarter’s GDP kept optimism in check.
Incomes and Spending
Consumer spending for April threw the experts for a loop when it posted the first monthly loss in a year. Personal income increased $43.7 billion, or 0.3 percent in April, and disposable personal income (DPI; income after taxes) increased $44.6 billion, or 0.3 percent, the Bureau of Economic Analysis reported last week.
Economists had expected personal consumption expenditures (PCE) growth to slow from 1 percent growth in March to 0.2 percent, but April PCE actually decreased $8.1 billion, or 0.1 percent.
Ultimately, April’s performance boils down to consumers needing more income growth, according to Stephen Stanley, chief economist at Pierpont Securities LLC, who predicted the decline according to Bloomberg.
“The risk at this point is that the consumer is falling back into a pattern of mediocre spending growth,” Stanley told Bloomberg last week. “You need to see more wage growth.”
While Americans spent less in April, they’ve saved more. Personal saving, which is DPI less personal outlays (which includes PCE as well as interest and transfer payments) hit $518.1 billion in April, compared to $464.4 billion in March. The personal saving rate — personal saving as a percentage of DPI — grew to 4 percent in April over 3.6 percent in March.
Initial Jobless Claims
First-time claims for unemployment benefits filed by the newly unemployed enjoyed a bigger drop than employment watchers had expected, according to last week’s news from the Employment and Training Administration. While the market had expected initial jobless claims to drop to 318,000 claims, they actually fell to 300,000, a decline of 27,000 claims from the previous week's revised level of 327,000.
Turning to the four-week moving average, which is considered a more reliable near-term employment statistic because it is less volatile, last week posted a solid 11,250-claim drop to 311,500, a decrease of 11,250 from the previous week's revised average. This was the lowest level for this average since 311,250 claims in Aug. 11, 2007.
GDP
While incomes were up and near-term employment offered encouraging news, the economy shrank for the first time in three years during the first quarter, according to last week’s report from the Bureau of Economic Analysis. The Bureau reported that real gross domestic product, which is the output of goods and services produced by U.S. labor and property, decreased at an annual rate of 1 percent in the first quarter. Comparatively, the fourth quarter’s real GDP grew by 2.6 percent.
Many experts had expected the bad news based on the first quarter’s dominant trend: terrible weather, which negatively impacted various elements of the economy at that time.
The first quarter’s negative performance casts a shadow on projections that economists made at the outset of 2014 that the year would see 3 percent GDP growth overall. However, lest anyone succumb to too much gloom, various economists noted that current data such as last week’s reports on better-than-expected employment performance and income growth indicate the quarter’s poor performance is already in the process of being reversed.
“The U.S. recovery took a backward step in the first quarter, most likely the result of many parts of the country having been battered by extreme weather at the start of the year,” Chris Williamson, chief economist for Markit, told the Los Angeles Times. “However, current indicators suggest this was merely a temporary setback in an otherwise ongoing robust recovery, pointing to a strong rebound in the second quarter.”
This week, we can expect:
- Monday — Construction spending for April from the Census Bureau.
- Tuesday — Car and truck sales for May from the auto makers; factory orders for April from the Census Bureau.
- Wednesday — April trade balance data from the Census Bureau and Bureau of Economic Analysis.
- Thursday — Initial jobless claims for last week from the Employment and Training Administration.
- Friday — Payrolls, unemployment rate, earnings and workweek for May from the Bureau of Labor Statistics; April consumer credit scores from the Federal Reserve.
Economic News in Review Greenville SC
Have a Big day,
Randy
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