JPMorgan Econ FI-United States-108470678.pdf

1MichaelFeroli(1-212)834-5523michael.e.feroli@jpmorgan.comJPMorganChaseBankNAMichaelSHanson(1-212)622-8603michael.s.hanson@jpmchase.comMuratTasci(1-212)622-0288murat.tasci@jpmchase.comNorthAmericaEconomicResearch31May2024JPMORGANbreaks.TheAprilJOLTSreleaseshouldalsopointtomodestfurthercoolinginlabordemand.FindingcomfortinthethirddecimalpointThemaindatareleasethisweekwastheAprilreportonper-sonalincomeandoutlays.Itshowedweakerthanexpectedconsumerspendinggrowthlastmonthandsomemodestfur-thercoolingincorePCEinflation–although,channellingFedGovernorWaller,oneneedstoreportuptothreedecimalstoseeit.Ontheinflationfront,thedataoverthepastseveralmonthshavebeenvolatile,withneithertheweaknessinlate2023northestrengthinearly2024likelyrepresentativeoftheunderly-ingtrend.ForApril,theheadlinePCEpriceindexrose0.3%(0.257%tothreedecimals),whilethecorePCEindexjustroundeddownto0.2%(0.249%)onthemonth.Theseread-ingswereatouchbelowourforecastsbutstillfirmenoughtoholdtheyear-agoinflationratessteadyat2.7%and2.8%,respectively(Figure1).Theannualizedthree-monthrunrateincorePCEinflationremainselevatedat3.5%,butthatisdownfromamuchstronger4.4%arpaceasofMarch(Figure2).Overall,wecontinuetolookforinflationtocoolfurtherthisyear,butthatpacehasturnedmoregradualoflate.-0.4-0.20.00.20.40.60.82018201920202021202220232024HeadlineCoreCoreserv.ex.housing%m/m,saFigure1:PCEpriceaggregatesSource:BEA,HaverAnalytics,J.P.Morgan-2024682015201620172018201920202021202220232024%ch,saarFigure2:CorePCEinflationrunratesSource:BEA,J.P.MorganOver6monthsOver3monthsOver12monthsWeakerconsumerspendinginto2QEventhoughitisstillsomewhatearlyinthequarterfor2QGDPtracking,thedatawereceivedthisweek–includingthe•CurrentquarterGDPtrackingrevisedloweronweak-erAprilconsumerspending•AprilcorePCEpricesincreaseby0.2%,softestmonthlyincreasesinceDecember•Withdownwardrevisionsto1Qaswell,1Hgrowthnowlookslessrobust•Nextweek’sMayemploymentreporttosetstageforJuneFOMCmeetingAfterastrong2023,economicactivitylookstobemoderatingthisyear.Thesecondestimateof1QrealannualizedGDPgrowthwasrevisedlowerfrom1.6%to1.3%.Moreover,Aprilrealconsumerspendingcontractedby0.1%.Promptedbythisnews,wenowsee2QGDPexpandingata2.0%pace,downfromourpreviousprojectionof2.25%(and2.5%twoweeksago).Wecontinuetolookforgrowthtomoderateintothesecondhalfoftheyearasthepost-pandemictailwindstoactivitygraduallyabate.Meanwhile,theFed’sfavoredinflationgauge,thecorePCEindex,increased0.2%lastmonth.Tohigherprecisiontheincreasewas0.249%,ahairbelowour0.26%forecast.Afterroundingtheyear-agoincreasewasunchangedat2.8%Tohigherprecisionthe2.754%increasewasthelightestsinceearly2021.Whilestillrunningtoohot,thereweresomeencouraginghintsinthelatestreport.Forexample,themar-ket-basedcorePCE(whichremovesimputedprices)increasedonly0.17%lastmonth.Elsewhere,thedatashowunsurprisingsoftnessinbothhous-ingandmanufacturing,whichtendtobemoreinterest-sensi-tivesectors.PendinghomesalesdeclinedsharplyinApril,whileregionalFedmanufacturingsurveysreportedsluggishmanufacturingactivityinMay.TheFed’sBeigeBook,a