With consumption (nominal 0.2% vs. consensus 0.4%) and personal income data for May, we have the following snapshot of some of the key figures, followed by the NBER BCDC.
Figure 1: Non-farm employment (dark blue), Bloomberg NFP consensus (blue+), industrial production (red), personal income excluding transfers in 2012 USD (green), sales in manufacturing and trade in USD in 2012 (black), consumption in Ch.2012$ (light blue) and monthly GDP in Ch.2012$ (pink), all logarithms normalized to 2020M02 = 0. NBER recession dates, peak to trough, shaded in grey. Source: BLS, Federal Reserve, BEA, via FRED, IHS Markit (née Macroeconomic Advisors) (issue 06/01/2022), NBER and author’s calculations.
Three of the four indicators for which we have data for May continue to rise, while real consumption is declining. The 0.2% m/m drop in consumption is surprising, but not unprecedented; in December 2021, it fell by 1.4% m/m. Here is a breakdown of real consumption and changes in real consumption.
Figure 2: Consumption of non-fuel non-food items (blue), energy consumption (yellow), and food consumption (green), in billions of US dollars, 2012 CAAP. Source: BEA.
Here are the details of the change in consumption:
Figure 3: Change in consumption of non-fuel non-food items (blue), energy consumption (yellow), and food consumption (green), in billions of US dollars, 2012 CAAP. Source: BEA.
Consumption has fallen in all categories, although in numerical terms most of the change comes from a decline in core consumption (which makes sense as core consumption accounts for about 87% of the total).
In nominal terms, the share of non-core spending increased from 4% to 4.9% between Q1 2021 and Q1 2022, so higher energy and food prices have definitely reduced core spending.
I found it interesting to see how seasonal adjustment after the 2020 recession has affected our understanding of consumption growth. It turns out that the year-over-year change in the non-seasonally adjusted series and the (standard) seasonally adjusted series are different (which was not usually the case between 2014 and 2019):
Figure 4: Annualized consumption growth rates (blue) and seasonally adjusted consumption growth rates (brown), calculated as log differences. Source: BEA, author’s calculations.
This suggests some caution in interpreting high-frequency growth (annual seasonally adjusted growth of 3.5% versus 4.1% for real GDP).
Q2 GDPNow at -1.0%, IHS-Markit, -1.5%; Goldman Sachs +1.9%.