Review of March 2024 data, 1Q GDP, PCE and personal income

The monthly summary is not so wonderful, incomparison...

Inside all that pink is some troubling food related issues. Even though energy is somewhat in a narrow band, the food outlook is upward. The CPI-U expectations for the report on April, seemingly indicates a repeat of Mar-2024, outpacing the monthly core, although core is expected to ease a bit. Still above the overall CPI-U.

As for the personal income arena... this is the link... https://www.bea.gov/news/2024/personal-income-and-outlays-march-2024

There seems to be quite a jump in spending, versus Disposable personal income... for 2 consecutive months. Not sure there was much cash on hand, so the disposable is likely in the form of additional debt. 

Of course the above report mentioned a rise in goods. Perhaps it did, but the 1Q GDP did not reflect that. 

As for GDP, it now stands at 1.6% annualized for 1Q2024. The Trade deficit loomed large in the quarter and shows no signs of abating.

The reports for the month, ended up in so-so territory, imho. I am sure it will get spun hard in each direction. 

Review of February 2024 data, 4Q GDP Revision, PCE and personal income

The monthly summary...

The overall PCE edged upward, on annual basis, with PCE ex food and energy staying flat. 

Of course, the official got revised up for January, which indicates a difference from my report...

As for the personal income arena... this is the link... https://www.bea.gov/news/2024/personal-income-and-outlays-february-2024

Note the revisions as always, and I would recommend tracking the data monthly. Revisions are normal part of the cycle, as more data comes in. Recently however... previous data seems to come in a tad lower, which results in inflated current estimates. This was not always the case.

As for GDP, it seems to have edged up for 2023-4Q. I am not going to beat that horse over trade deficit numbers. I will simply state that prior to transfer of data from 2012 dollars into 2017 dollars, the GDP was marginally better. That adjustment amounts to about 1.9% annualized. So just take that with a grain of salt, as it is just my opinion.

One remaining bit of info can be found here. While I might harangue about the national debt, the 2023 year end net international investment was released. UGLY, at almost $20T. THAT IS WHAT WE OWE OTHER COUNTRIES.

https://fred.stlouisfed.org/series/IIPUSNETIQ

Review of January 2024 data, 4Q GDP Revision, PCE and personal income

The monthly summary...

The downward shift in inflation continues across the board, with the exception of my price index, which is more about healthcare than any other weightings.

There were modest revisions in the PCE report, which are highlighted in Red.

I have made much of government spending on the GDP, but historically... not so abnormal (all charts from 2000Q1 onward...

A bit grainy in the upload, but trends are evident. The worrying factor is the trade deficit, while showing a bit of improvement the past few months, is still staggering compared to 10 years ago.

Bored silly, so will leave it there. 

Review of December 2023 data, 4Q GDP, PCE and personal income

Alas, 2023 reports have concluded. The GDP's 4Q advance reading indicates a sterling 3.1% rise. I will make mention of the 5 year Quinquennial revision from 2012 dollars to 2017 dollars. As would be expected the numbers jumped 9.0%. I can't help but notice the big drag on GDP of net exports of good and services, slid a whopping -26.7%. 

Even under the revised numbers, that latter component fell another -5.9% from one year ago.

PCE, which is typically 68.7% of GDP under the 2017 revision, made up 58.3% of that yearly increase. 

Which gives pause to the notion of the consumer driving those GDP numbers, when in fact they appear to have been a bit of drag.

Gross private investment, also underperformed. The real over achievers were government and net exports of good and services. 

It is what it is.

PCE ex. food and energy ease from 3.4% to 3.2%. The overall remained unchanged.

All in all, a decent end to the 2023 years.

Review of November 2023 data, GDP, PCE and personal income

 I'll try not to harp about this too much. The BEA switched from 2012 dollars to 2017 dollars for 3Q23, and adjusted prior data. I download all such reports, so I can easily tell the difference.

The trade deficit is a drag on GDP, thus in the 2Q23 original report, that drag was -5.95%. As of right now, after those adjustments... the drag is-4.14%. Quite an improvement. The stated +4.9% GDP is a catch up to what can only be viewed as under-reporting of previous quarters. 

How that change affects going forward, is uncertain to me. Given the wide array of expectations for 4Q23, I am thinking not everyone is on the same page. I am done harping about this.

Now on to the PCE report, after reviewing adjustments...

Yes, inflation is slowing, not deflating, with the exception of gasoline, which looks to have stopped falling.

The monthly summary...

All in all, a pretty good monthly report card. I do think the market is making too big a deal on expectations of the FED cutting rates before summer, but what do I know?

A Further Review of 3rd Quarter, 2023 GDP... just for fun!!

So yes, the GDP was revised to 5.2% annualized, from 4.9% annualized. That does not mean the economy is robust. It's not bad, but robust is a bit of hype for politicians.

The BEA moved from 2012 dollars to 2017 dollars for the 3rd quarter releases and going forward, until next change in... say 5 years.

In theory, it should have been even across the board, after compensating for 5 years of dollar value adjustments, etc. Such as inflation being about 7.5% during that 5 year period.

If only there was someone, somewhere that downloads those excel spreadsheets from each GDP iteration.

Voila...

Note the column headings for 2012 dollars and 2017 dollars AND the % Change. The changes were clearly not uniform across the various groupings.

While there was a 9% upward adjustment, several groupings failed to match that rise, including some that went negative... while others outpaced the 9% reading.

So in theory, all the numbers going back in time were revised to reflect the current situation. But again, that was very uneven. Just consider the trade deficit, which is a drag on GDP... and those changes.

All in all, it did distort the 3rd quarter readings and possibly provided a misleading annualized number. That would be no big deal... if not for an election year and people willing to make everything political. 

While the current 5.2% annualized is being hailed as something significant, I wonder what will be hailed, when the 4th Qtr. 2023 is revealed on January 25th, 2024. My guess is way below that 5.2%. Back to the 2.0% annualized, or even lower!  

One can imagine the hysteria over such falling numbers, but the adjustment was improperly attributed to a "robust" economy.

So remember... the trade deficit, which is a drag on GDP was revised dramatically lower, after the BIG change for 2012 to 2017 dollars. That trade deficit adjustment was about 100% of that 5.2% annualized, or ±0.1% annualized without that lone adjustment.

You think I might be off my rocker! The current Real GDP rolls in at 22,506.4B, which is a hefty 281B above the 2nd qtr. figure of  22,225.4B. Now take a look at that downward revision of the trade deficit,  -284B. 

Remember the trade deficit is a drag on GDP, so a downward revision in the Trade deficit would result in a higher GDP print. IF the GDP had not been revised downward by -284B, then that +281B gain in GDP would evaporate. As in +0.1% annualized.

Oh well! It is just numbers and you can believe what you want. However... that adjustment was one time only, for the time being and 4Q23 will be significantly lower, imho. How does a drop off from +5.2% annualized to say +1.7% annualized look in an election year. 

One group will claim the economy is crashing into a recession, another group will be saying soft landing is working, and another group will be screaming the FED must cut rates rapidly.

I then ask you, if stating the 3Q23 was actually 0.1% and the 4Q24 was +1.7%, would indeed indicate a possible soft landing. Of course, the groups would likely being crying the same thing... just 3 months earlier.

It is fun to watch all the spin!

Review of October 2023 data, GDP, PCE and personal income

Just some charts with a bit of commentary...

The headlines proclaimed a resilient consumer propelled the advance estimate of 4.9% annualized... to 5.2%. Seriously, the PCE slipped from 4.0% to 3.6%. You could toss in Residential investment, but you still come up lacking. 

It was a good report, but could have done without the spin, imho.

A couple of charts about PCE. Adjustments are in red. Again, a good report.

And to finish up the charts...

October ended up being an all around good month. May it continue.

Review of August data and the September PCE Release

Yep, today's report was positive, with an uptick of +0.4%. That being in current dollars and when adjusted for inflation became... -0.2% for the month to month. The good news was the year to year inflation adjusted +0.1%. 

I did not denote the various changes from previous month's release, so but can be seen in previous publications.

It should be noted that multiple adjustments were made to previous readings, as indicated below...

The FED chain type report of PCE, excluding food and energy was adjusted to 2017 from previous 2012.

The 3.9% current, hearkens back to May of 2021, when things were transitory. The signs are pointing downward, but that 3.0% target remains distant, imho.

The scorecard for this month looks like this.

If I were grading this report, it would be 47.1%, compared to last month's 52.9%. Translation: My confidence in inflation heading towards 2.0% is not as great as some are predicting. 

Review of July data and the August PCE Release

Some ups and some down in the latest release from the BEA. (red revised down, green revised up).

Chained dollar disposable income was revised down for April and June, with a negative print on July.

However, the chained dollar PCE was revised down for March and May, with upward revisions in April and June. 

It seems evident that savings AND debt are currently driving the economy. How long that can last is the big question.

Then there is the matter of PCE Excluding Food & Energy. If the target is 2%, then there is a way to go, given the forecast for August is at 4%. Years ago, when the PCE ex food and energy was failing to achieve even 2%, there was discussion of moving the target to 4%. 

That hasn't happened, so how can it be expected for the FED to ease off the interest rates? 

https://www.bea.gov/news/2023/personal-income-and-outlays-july-2023

We are now 28 months with the PCE ex food and energy above the 2% mark, and 17 months into the FED increasing rates. 10 months out, with the aforementioned halting its rise. 

The chart below indicates some problems still within the system. Last month had just one category in pink. 

We are at the end of August and its data will likely be similarly ugly. Let's hope for some relief in September. 

Review of June data and the July PCE Report

A story of glass half empty versus a glass half full...

For months on end, the data has contained revisions of prior months being downward, which gave that current report a glass half empty kind of vibe.

For the past two months... the previous months data has been revised upward, which emits a vibe of glass half full for the current month.

That's a positive, imho.

https://www.bea.gov/news/2023/personal-income-and-outlays-june-2023

Certainly a downward trend is in full view across the board, when mentioning inflation...

The Annual PCE, ex food and energy, is also slipping.

This is good news, as it indicates "sticky" prices are starting their downward slide. Just in time, as energy prices seem to be edging up and food prices may as well. Not everything is rosy, but optimism is not unreasonable. 

EXCEPT, next month's projections are for PCE to come in around 3.4% and core at 4.4%. Is that the last dying gasp of inflation, or signs of things to come?

Review of PCE, GDP, etc., for end of June, 2023

Another month to review (with some comments at the end)...

The following looks good, except....

The outlook for core is actually higher than the total inflation. Which means food and energy are the main drivers of overall lower inflation. Sounds good, except it really isn't food as much as energy. Energy crested in June of last year and then quickly slid... going into September. 

Just saying, the falling overall inflation numbers may come to an abrupt halt in the fall.

Now for the adjustments...

Personal Income and Outlays...

Now for the GDP...

The updated estimates primarily reflected upward revisions to exports and consumer spending that were partly offset by downward revisions to nonresidential fixed investment and federal government spending. 

I highlighted my area of concern. Note the statement of upward revision in consumer spending, then review the PCE expenditures directly above. January was good and presumably the revision upward in February would match up with the quoted statement.

However, April was revised up a mere +0.2 from original flat and May is also flat. 

So where is the growth coming from in the 2nd quarter?

Review of PCE, GDP, etc., for end of May, 2023

 

There was a "surprise", as the PCE EX FOOD and ENERGY was higher than forecast. I am not sure why it was a surprise, as the forecast I saw... was for 4.7%. 

Unfortunately, the expectations are a bit higher for April's PCE report. PCE at 4.5 and core at 4.7%. 

Perhaps the surprise was no downward revisions.

Personal consumption and outlays...

I would think the 0.0% rise in chained (2012) dollars for Disposable personal income, compared to PCE of same being at 0.5% would raise some eyebrows. But it is a credit driven economy, so what the heck. Going deeper in debt is the national pastime. 

Even the GDP was touted as going up from advance estimate of 1.1% to 1.4%, as being stellar. While ignoring the GDI for 4th quarter 2022, was revised sharply downward from -1.1% to -3.3%. The GDI for 1st quarter, 2023 came in at a -2.3% mark. 

In any case DPI now stands at +2.6% above the 1st Quarter, 2020 level. Presented without further editorial comment.

Review of PCE, GDP, and other Nonsense, for end of April, 2023

I found some things of interest in the GDP and PCE reports, but first... the usual nonsense.

The sticky prices continue to be the story. 

The 4.6%, in today's report, takes us all the way back to October, 2021 and 4.3%. About the time a suggestion was made to end the use of transitory.

The following chart is a snapshot of this month's report, compared to last month and the revisions are highlighted in red. Nothing sinister, as this happens frequently as it is based on incomplete data, that becomes more complete as time passes. 

In short... this month's data could be revised up or down by next month.

In any case, the PCE came in at expectations. Services saved the day, but before you think of restaurants as services... it is, but on about 18%. Think housing and utilities, which were a bit hot, imho.

Unfortunately, the expectations are a bit higher for April's PCE report. PCE at 4.5 and core at 4.7

GDP came in a surprise 1.1% annualized. The forecast I was looking at, was around 2.0% annualized. The problem with the downside surprise, is the -1.8% forecast for 2nd and 3rd quarter, with -0.6% for the 4th quarter.

The shocker was in the change in private inventory sector, which was -1.6, compared to last month's +136.5. The reason for such a number is where the big story might be. But, I am too tired to contemplated that any further on a Friday night.

Have a nice weekend!

Review of PCE, GDP, and other Nonsense

So here is the various inflation numbers...

Click image to enlarge

This also, includes the latest revisions in the PCE release. I include the previous month's report to indicate any revisions.

Click image to enlarge

For reference only, the PCE ex food and energy, has increased 10.3%, from February, 2021. The cpi-u ex food and energy, increased 12.3% over that period. The CPI including food and energy has risen 14.4%. 

I guess my 1st point being... back in the transitory days of inflation, with it around 5.5%, the prices did not stop rising. So 5.5%, really was transitory. The March data should be slightly below that transitory number, yet I don't expect those proponents of transitory to come out saying... see I told you so. 

The 2nd point being... we were upset when inflation was eroding our purchasing power between 4%~5%, so the sticky prices (ex food and energy) seem to be stuck in that range. Smarter minds than me, forecast core PCE to achieve that noble 2% target in late 2024.

I am beginning to think a recession will be necessary to bring down those sticky prices, although those smart minds are already forecasting 3 consecutive quarters of negative GDP, beginning in 2nd Qtr, 2023. Which brings me to GDP.

Being a glass half full kind of guy, I look for the potential problem areas in reports, such as the GDP. It strikes me that the increase in inventories and the net deficit of imports/exports, erases that 2.6% annualized to 0%.

Going forward, I would anticipate the net deficit in imports/exports to slightly increase for the 1st quarter, and inventories to remain steady or slightly increase. Which requires the other categories to do the heavy lifting. You guessed it... it largely falls on the consumer.

I have completely wasted a few hours on this article, and it is time to enjoy Saturday.

PCE Revisions and End of Month Inflation Results (All Reports)

So here it is...

Click on image to enlarge

This also, includes the latest revisions in the PCE release. I include the previous month's report to indicate the revisions.

Click on image to enlarge

You will notice some sharp upward revisions, compared to last month. That +0.6% M/M increase was after the major adjustment in December's numbers. Without that December adjustment, that +0.6% would have been much higher. 

Don't worry too much, as these numbers get adjusted on a regular basis. It does serve to point out that inflation is not falling off a cliff.

The good news would be the "trimmed mean PCE". It actually slid -0.1%, after holding at 4.7% for the preceding 5 months. 

The BEA Report. The Dallas FED Report. For a breakout of "trimmed"... 

• Components included and excluded from this month's Trimmed Mean

It is an Excel download. Of the 54 items not trimmed, I utilize 7 (13%.) Of the 121 trimmed out, I utilize 42 (34.7%.)

Oh well, my own CPI is 5.5%. Using the trimmed mean, it is 4.9% v the FED's 4.6%. 

I would write about the GDP, but it gets revised on a regular basis. Next month will be revised and the annual revision in July will take place for all. Sometimes, as much as 3.0% change from the original advance release.

GDP 2Q, 2022 2nd Est., PCE, Income and Outlays, Inflation Summary and Opinions!

The BEA released the 2nd estimate of GDP and it was revised to -0.6% annualized. You can read the link at your leisure. I am not going to yap about the data or the verbiage in the release. 

What did amaze me, was a ripple in the news about the trade deficit. Here is my updated trade deficit drag on GDP...

Click to Enlarge

The media has been reluctant to mention trade deficits, so it was a surprise to see it noted on my twitter feed. 6 straight quarters of record trade deficits to GDP and someone noticed. Also, the dollar rise seems to have awakened some, after 4 quarters of rises... amounting to 17.2% increase.

This was all yesterday's news, so onto the Personal Income and Outlays...

Personal income increased $47.0 billion (0.2 percent) in July, according to estimates released today by the Bureau of Economic Analysis (tables 3 and 5). Disposable personal income (DPI) increased $37.6 billion (0.2 percent) and personal consumption expenditures (PCE) increased $23.7 billion (0.1 percent).

The PCE price index decreased 0.1 percent. Excluding food and energy, the PCE price index increased 0.1 percent (table 9). Real DPI increased 0.3 percent in July and real PCE increased 0.2 percent; goods increased 0.2 percent and services increased 0.2 percent (tables 5 and 7).

Click to Enlarge

Note that June numbers were revised upward, 0.1% on the DPI and downward of PCE. In any case, the expenditures (PCE) is still outpacing the disposable disposable income (DPI). 

Here is a summary of various inflation gauges for July...

Click to Enlarge

It is impossible for me to finish without an opinion, although my opinion is sprinkled throughout.

As I have noted in previous articles, even the BLS stated the flat July reading was totally due to -7.7% change in gasoline prices. I would put the fall for August near the -10% range. It would seem the expectations would be for another flat month or possibly a negative print. 

But... the energy index was down last month -4.5%. There is more to energy than just gasoline as the rise in electricity was +1.9% and piped gas (N/G?) was down -3.9%. I would expect a continuation of electricity rises and a reversal of piped gas... back to increases. 

Also, the SPR release is set to halt at end of October, and OPEC is suggesting production cuts... to stabilize prices!

Diesel prices falling has shifted the past two days and is showing an upward tilt, as fall harvest is now beginning. Gasoline prices continue to fall, but we haven't had a storm in the gulf. Keep an eye on the tropics!  

Speaking of weather... food is rather dependent on the weather, with droughts inhibiting yields, and heavy rains disrupting both planting and harvesting. These weather occurrences are always an issue for someone, somewhere. The frequency and widespread occurrences, are troubling.

Fertilizer is also used to increase yields in crops, and are a global commodity. A lot of natural gas is used in the production of fertilizers. European producers of fertilizers are reducing and/or curtailing production of fertilizers... as natural gas prices have become to high to operate. 

Of course, that would be a European problem, except fertilizers are once again... a global commodity. Research phosphate, nitrogen, potash, anhydrous ammonia, etc. 

While LNG export is limited by infrastructure... these fertilizers are mostly not. So even if there is a good growing season, the cost of raising those crops will increase, due to fuel costs (diesel) and yield enhancing fertilizer.

The old adage "hope for the best, but prepare for the worst", comes to mind. Not that the worst will happen, but let's not become giddy over some short term positives about peaking inflation, etc. 

Or as Yogi said... "it ain't over, till it's over."