Mixed U.S. Data Confirm Economic Slowdown But Offer Some Hope

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Reports out Friday offered a mixed picture for the U.S. economy, signaling first-quarter growth will be even softer than expected yet offering some hope that the worst weakness may prove transitory.

Consumer spending, which accounts for about 70 percent of the economy, rose less in January than analysts expected, while a regional purchasing managers’ gauge for March fell by more than forecast. But new home sales in February jumped to the highest in almost a year, and a measure of consumer sentiment rose by more than initially reported.

“We can’t allow this sort of short-term bump in the road in the December and January data to steer us in the wrong direction,” said Jacob Oubina, senior U.S. economist at RBC Capital Markets LLC. “You’ve got a really good, healthy fundamental backdrop for households.”

Some analysts lowered first-quarter growth projections after the spending report: Barclays Plc took its tracking estimate down to 1.7 percent from 2.2 percent, while Macroeconomic Advisers by IHS Markit cut its number by 0.2 percentage point to 1.2 percent.

Here are the highlights of Friday’s numbers:

Personal Income (Feb.) and Spending (Jan.)

Purchases, which account for about 70 percent of the economy, rose 0.1 percent from the prior month after a downwardly revised 0.6 percent drop, according to the Commerce Department. Personal income rose 0.2 percent in February, also less than forecast, while the Federal Reserve’s preferred gauge of core inflation unexpectedly slowed. It all reinforces Fed projections for no interest-rate hikes this year.

What Bloomberg’s Economists Say

A number of temporary factors weighed on consumer spending in January. Bloomberg Economics expects these headwinds to continue to squeeze spending in the current quarter before dissipating in the second.
-- Yelena Shulyatyeva and Tim Mahedy, economists
Click here for the full note.

New Home Sales (Feb.)

Single-family home sales rose from the prior month to a 667,000 annualized pace, compared with January’s upwardly revised figure of 636,000. The median sales price fell 3.6 percent from a year earlier to $315,300, indicating lower costs for mortgages and properties are attracting buyers. That joins a separate report earlier this month showing the biggest gain for existing home sales since 2015, though housing starts have been cooling.

Consumer Sentiment (March)

The University of Michigan’s final sentiment index climbed to 98.4 from the prior month’s 93.8. The median estimate of economists surveyed by Bloomberg was 97.8, the same as the preliminary reading released earlier this month. The gain was concentrated in the bottom two-thirds of the income distribution, with the share citing improved finances at a record for this group. The report, though, contrasts with other recent data on sentiment from the Conference Board and Bloomberg Consumer Comfort Index.

Chicago PMI (March)

The Chicago Business Barometer, based on a survey of companies in the metro area, fell by 6 points to 58.7, according to Market News International. That resulted in a first-quarter average of 60, the lowest in two years. While the index remains well above the 50 level that indicates expansion, “survey evidence points to a slight slowdown since last year,” MNI economist Shaily Mittal said in a statement.

--With assistance from Jeff Kearns, Katia Dmitrieva and Carlyann Edwards.

To contact the reporters on this story: Reade Pickert in Washington at epickert@bloomberg.net;Scott Lanman in Washington at slanman@bloomberg.net

To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Jeff Kearns

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