Economic Outlook - June 2024
- The U.S. economy grew at a slower pace in the first quarter (Q1) than previously reported. The Commerce Department stated that the second estimate for Q1 real gross domestic product (GDP) increased at an annual rate of 1.3%, down from 1.6% in the advance estimate. The latest figure primarily reflects downward revisions in consumer spending, private inventory investment, and federal government spending that were partly offset by upward revisions to state and local government spending, nonresidential and residential fixed investment, and exports. The Federal Reserve of Atlanta’s GDPNow model estimate for real GDP growth in Q2 is currently 1.8%, down from 2.7% less than one week earlier. For the full year 2024, we anticipate real GDP growth in the range of 1.0% – 1.5%.
- The housing market continues to struggle as potential home buyers face a shortage of existing inventory in the market, high mortgage rates and elevated home prices that are depressing affordability. The National Association of Realtors reported pending home sales fell 7.7% in April compared to March, which is the slowest pace in four years. All regions in the U.S. had month-over-month and year-over-year decreases, with the Midwest and West registering the largest monthly declines.
- The labor market remains resilient but is showing some signs of slowing. The ADP National Employment Report showed employment in the nonfarm private sector increased 152,000 jobs in May, compared with 188,000 in April. This marks the second straight month of declining new job growth. The manufacturing sector led the slowdown in overall job creation, losing 20,000 posts from April, while the services sector added close to 150,000 positions. Large and medium-sized businesses added all of the gains. Small-company employment declined. The ADP estimate is based on aggregated payroll data of more than 25 million U.S. workers and is independent of the Labor Department official data that will be reported later this week. While the ADP report is not always a predictor of the government’s official jobs estimate, they do tend to trend in the same direction over time.
- The Federal Open Market Committee’s quantitative tightening is having the desired result. The Consumer Price Index all items index (CPI) increased 3.4% for the 12 months ending April, down from the 4.9% figure reported twelve months prior. The Personal Consumption Expenditures Index, excluding food and energy (Core PCE), the Fed’s preferred inflation gauge, rose 2.8% from a year ago, a welcome decline from last year’s 4.7% reading. While both figures remain higher than the Fed’s 2% long-term inflation target, the Federal Reserve’s monetary policy actions have a lag effect, and therefore we expect inflation figures should continue their downward trend.
Sources: FactSet, Dow Jones Publishing, Bloomberg, Bureau of Labor Statistics, U.S. Federal Reserve, Yardeni Research, National Association of Realtors, Bureau of Economic Analysis, Atlanta Fed.
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