This week’s data releases included an initially surprising figure for real GDP growth in Q1: negative 2.9%. In more normal situations this would have scared investors out of the market and created a worrisome weekend for many individuals. However, a downward revision to the data wasn’t unexpected. While the negative 2.9% figure is indeed worse than the forecasted negative 1.8%, the scale of the discrepancy is common. Also, as has been noted in this weekly report and many others, the decline is expected to be a one-time event.
Also keep in mind that recessions are not just based on GDP data anymore. Economists look at incomes, production, and employment, among other things. Most of these other categories that identify economic health have been growing, just not at the rates we had hoped. Individuals and businesses have also expressed continued optimism in the economy.
Retail sales for May rose by only 0.3 percent, led by demand for cars, trucks and home improvement products, though spending eased at most other retailers. The 0.3 percent was less than the 0.7 percent expected and was the lowest level since January’s reading. Retail sales account for about one-third of consumer spending, and are the main driver of U.S. economic activity. Growth in this area is a key factor in our economic recovery.
In housing news, on the positive side RealtyTrac reported that there was a 5 percent decrease in all types of foreclosures from April to May, with a heavy concentration in the northeast and along the west coast. There was also a 26 percent decrease from May 2013 to May 2014. On the other hand, Fannie Mae’s May 2014 National Housing Survey revealed that tepid household income and concerns surrounding the U.S. economy are weighing on the housing sector.
Personal income grew by 0.4% in May and now stands 3.5% over a year ago. Disposable personal income was also up 0.4% and 3.7% over the same time periods. Personal consumption expenditures grew at a slightly slower pace, rising 0.2% from a month ago and 3.7% from a year ago.
Consumer confidence, according to the Conference Board, now stands at 85.2. This is the highest level reported since early 2008. Yet, consumer confidence as measured by the University of Michigan survey, while still high, lags year earlier levels.