Business Cycle Indicators end-June

With consumption (nominal at 0.2% vs.0.4% consensus) and personal income May releases, we have the following snapshot of some key indicators followed by the NBER BCDC.


Figure 1: Nonfarm payroll employment (dark blue), Bloomberg consensus for NFP (blue +), industrial production (red), personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), consumption in Ch.2012$ (light blue), and monthly GDP in Ch.2012$ (pink), all log normalized to 2020M02=0. NBER defined recession dates, peak-to-trough, shaded gray. Source: BLS, Federal Reserve, BEA, via FRED, IHS Markit (nee Macroeconomic Advisers) (6/1/2022 release), NBER, and author’s calculations.

Three of four indicators for which we have May data are still rising, while real consumption is decreasing. The drop in consumption of 0.2% m/m is surprising, but not unprecedented; it fell 1.4% m/m in December of 2021. Here’s a decomposition of real consumption, and changes in real consumption.

Figure 2: Nonfood nonfuel consumption (blue), energy goods consumption (tan), and food consumption (green), in billions Ch.2012$ SAAR. Source: BEA.

Here’s a detail on the change in consumption:

Figure 3: Change in nonfood nonfuel consumption (blue), energy goods consumption (tan), and food consumption (green), in billions Ch.2012$ SAAR. Source: BEA.

Consumption fell in all categories, although in numerical terms, core consumption decline accounted for most of the change (which makes sense since core is about 87% of total).

In nominal terms, the share of noncore spending has risen from 4% to 4.9% going from 2021Q1 to 2022Q1, so energy and food price increases have definitely squeezed core expenditures.

I thought it of interest to see how seasonal adjustment in the wake of the 2020 recession has affected our understanding of growth in consumption. It turns out the y/y change in the not seasonally adjusted series and the (standard) seasonally adjusted series differ (which has not typically been true between 2014 and 2019):

Figure 4: Year-on-year growth rate of consumption (blue), and not seasonally adjusted consumption (brown), calculated as log differences. Source: BEA, author’s calculations.

This suggests a little caution in interpreting high frequency growth (seasonally adjusted y/y growth is 3.5% vs. 4.1% for real GDP).


For Q2, GDPNow at -1.0%, IHS-Markit, -1.5%; Goldman Sachs at +1.9%.