High frequency economics is truly living up to its name, as now GDP forecasts are adjusted not weekly but daily. After Goldman yesterday hiked its Q2 GDP forecast to 1.7% on better than expected Q1 GDP composition, today's weak consumer spending data pushed it right back down.
Soft Consumer Spending:
BOTTOM LINE: Consumer spending was unchanged in May and earlier months revised down. Q2 GDP now tracking +1.6%. Core PCE inflation lower than expected for the month.
1. Nominal personal consumption expenditures (PCE) were unchanged in May. Real PCE was up 0.1% (month-over-month). Although results for May were close to consensus expectations, earlier months were revised lower. In particular, monthly growth in real PCE for both March and April was revised down by 0.2 percentage points. Due to the downward revisions to March and April PCE, we revised down our estimate for Q2 PCE to +1.8% (annualized) from +2.0% previously. This lowered our tracking estimate of Q2 GDP growth to +1.6% from +1.7%.
2. Nominal personal income increased by 0.2% in May, as expected. Real disposable income increased by 0.3%, and has accelerated modestly to +1.1% year-over-year (from a low of +0.2% yoy in February). The PCE price index declined by 0.2%, as expected. The core PCE price index increased by +0.12%, less than the consensus had forecast. However, because of upward revisions to earlier months, the year-over-year growth rate in the core PCE price index was in line with the consensus expectation at +1.8%.