It’s Friday and that means it’s time to review the latest economic data and identify which pockets of the economy are heating up and which are slowing down. Don’t worry about catching every headline and every report throughout the week—I recap all of the most important news impacting your wealth right here every Friday. Let’s take a look at this week’s big headlines, starting with the market moving GDP report:
Q1 Economic Growth Freezes Up
The Commerce Department reported this week that the U.S. economy nearly stalled in the first quarter, only growing at a paltry 0.2% pace. That’s down from a 2.2% pace in the fourth quarter and a 5% pace in the third quarter. This was also lower than economists’ expectations for the U.S. economy to grow at a 1% pace. The lower-than-expected first-quarter GDP wasn’t all that surprising, given severe winter weather, port disruptions on the West Coast, a strong U.S. dollar pinching exports and cheap crude oil during the first three months of the year. And many economists are predicting that second-quarter GDP growth will rebound.
Layoff Activity Falls to 15-Year Low
For the week ending April 25, initial claims for unemployment dropped by 34,000 to 262,000. Economists had forecast new claims to be at 288,000 last week. And initial claims for the prior weeks was revised up a bit to 296,000. The four-week moving average slipped to 283,750. This is the lowest level in jobless claims that we have seen in 15 years. In addition, the report showed that continuing claims slipped to 2.253 million for the week ending April 18, which is the lowest level since early December 2000. So the U.S. labor market is still showing signs of strength.
All Is Quite on the Wage Front
For the month of March, personal income didn’t change from February, staying at 0%, while spending increased slightly to 0.4%. Economists were looking for personal income to grow 0.2% and spending to rise 0.5%. While this was an overall disappointing report, the finer details were actually more positive. Consumer spending was at 1.9%, which isn’t spectacular but stills strong, and real after-tax income increased 6.2% in the first quarter.
Construction Spending Pulls Back
For the month of March, U.S. construction projects declined 0.6% to a seasonally adjusted rate of $967 billion, after being flat in February. Economist forecasted a drop of 0.5%, so this was a slightly steeper drop than expected. Housing construction also declined by 1.6%, while government spending on housing projects dropped for a third time in row (by 1.5%). Meanwhile, non-residential construction increased by 1%. The harsh winter weather did weigh on construction spending, but with spring well underway, economists are expecting a rebound in the coming months.
U.S. Consumers Feel the Chill
In April, the Conference Board’s consumer confidence index slipped to a 95.2 reading, falling short of economists’ predictions for a 102.5 reading. The index’s March reading was revised higher to 101.4, up from 101.3. Breaking it down further, consumers looking for business conditions to improve in the next six months fell to 16%, down from 16.8%, while those expecting more jobs dropped to 13.8%, down from 15.3%. It’s disappointing that consumer confidence slipped so much in April, especially after such a strong reading in March. However, given softening economic conditions here in the U.S., it’s not surprising that U.S. consumers are growing a little more cautious.
The University of Michigan’s Consumer Sentiment Index finished the month of April at a 95.9 reading. Economists were expecting a 96.0 reading, so this was slightly lower than expected. However, this is an increase from last month’s rating of 93.0, as low interest rates and low inflation continue to influence consumer optimism. The report stated that while majority of consumers anticipate a rate hike by year’s end, they expect it to be very minimal. The Fed has been punting interest rate hikes for a while, and given slow economic growth and mixed job numbers I don’t expect an interest rate hike anytime soon. So, consumer confidence should remain at current levels or even increase during the warmer months.
That’s all I have for you this week; I’ll be in touch on Monday with the latest ratings updates out of Portfolio Grader.
Have a great weekend,
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