Back Economics

PCE looks a bit stronger

Published on May 26, 2023

Gerard MacDonell

In this note, I take the data straight, forcing them through my standard processor. I have not looked for special items, as I am a bit pressed for time.

By virtue of the beat on both nominal and real PCE growth this morning, the trend in real consumer spending looks a bit stronger. For example, the underlying growth rate looks to be around 2%, just purely assessing the data on a backward looking basis, as opposed to the 1.5% growth rate I had eyeballed before. This sense is suggested by the standard real PCE data and by its ex-auto “core.”

Separately, there is now a bit of statistical momentum in the Q2 PCE growth rate calculation. If real PCE were to grow at an annualized rate of 1.5% in both May and June, just for illustration, then the quarterly real growth rate would be 2.1%.

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Description automatically generated — *Source: BEA, NBER, FH calculations*
*Data are actual to April.*

Nominal PDI rose 0.4% during April, roughly in line with pretax income and the labor compensation “core” there. Without outlays up 0.8%, the personal saving rate ticked down again. I would not make much of these monthly swings in the saving rate, but they fit a theme. Sorry! The earlier rise of the saving rate has stalled even though the accumulated stock of excess savings, as conventionally — and pointless — measured, has continued to fall. I boldly infer from this what I was already convinced of. The behavior of desired saving is not influenced much by that silly excess savings stock. We hear less of it these days, which is an advance, in my view. Plus the saving rate is probably mismeasured in a few ways. Do not reason from its level!

A picture containing text, diagram, line, plot

Description automatically generated — Source: BEA, FH calculations
*Data are actual to April.*

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