Here is the executive summary of the U.S. macroeconomic indicators and trending topics for May 2023.
US Macroeconomic Indicators
Fed Prepares to Skip June Rate Rise but Hike Later
Federal Reserve officials signaled they would likely hold interest rates steady at the central bank’s next meeting in June before preparing to raise them again later this year.
“Skipping a rate hike at a coming meeting would allow (Fed policymakers) to see more data before making decisions” about whether to increase rates further, said Fed Governor Philip Jefferson.
U.S. Labor Market Shows Resilience With Strong May Hiring
The U.S. Bureau of Labor Statistics reported that Total nonfarm payroll employment increased by 339,000 in May, and the unemployment rate rose by 0.3 percentage points to 3.7 percent.
The number of unemployed persons rose by 440,000 to 6.1 million.
Hiring surged this spring, the latest sign the U.S. economy maintains momentum in the face of rising interest rates and complicating the Federal Reserve’s decision over whether to pause rate increases this month.
Job gains occurred in professional and business services, government, health care, construction, transportation and warehousing, and social assistance.
Services PMI at 50.3%; May 2023 Services ISM Report On Business
Economic activity in the US services sector expanded in May for the fifth consecutive month as the Services PMI® registered 50.3 percent, according to the latest Services ISM® Report On Business®. The sector has grown in 35 of the last 36 months, with the lone decline in December 2022.
The Business Activity Index registered 51.5 percent, a 0.5-percentage point decrease compared to the reading of 52 percent in April.
“Eleven industries reported growth in May. The Services PMI®, by being above 50 percent for a fifth month after a single month of contraction and a prior 30-month period of expansion, continues to indicate sustained growth for the sector. The composite index has indicated expansion for all but three of the previous 160 months.”
A reading above 50 percent indicates the services sector economy is generally expanding; below 50 percent means it is generally contracting.
ISM Manufacturing PMI® Slid to 46.9% in May
The Purchasing Managers’ Index is based on five major indicators: new orders, inventory levels, production, supplier deliveries, and the employment environment.
According to the May 2023 Manufacturing ISM® Report On Business®, the value of the Manufacturing Purchasing Managers’ Index (PMI) in the United States contracted to 46.9 for the seventh consecutive month following a 28-month period of growth. It was 0.2 percentage points lower than the 47.1 percent recorded in April.
“Of the six biggest manufacturing industries, only one — Transportation Equipment — registered growth in May.
The Inflation Rate Rose at a 4% Annual Rate in May – The Lowest in 2 Years
Last month, the consumer price index rose 0.4%, pushed higher by rising shelter, used vehicle, and gas prices. The increase was in line with Wall Street expectations.
The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1 percent in May on a seasonally adjusted basis after increasing 0.4 percent in April, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all-items index increased 4.0 percent before seasonal adjustment.
The index for all items less food and energy rose 0.4 percent in May, April, and March. In May, increased indexes include shelter, used cars and trucks, motor vehicle insurance, apparel, and personal care. The index for household furnishings and operations and the index for airline fares were among those that decreased over the month.
US Mortgage Rates Continue to Come Down
The Freddie Mac data shows that mortgage rates decreased slightly in anticipation of the pause in rate hikes by the Federal Reserve. As inflation continues to decelerate, economic growth is slowing, and the tightening cycle of monetary policy is reaching its apex, which means mortgage rates are expected to decrease later this year and into next.
Spring is typically the busiest season for the residential housing market, and despite rates hovering in the mid-six percent range, this year is no different. Interested homebuyers are acclimating to the current rate environment, but the lack of inventory remains a primary obstacle to affordability.
- Tens of millions of people are under air quality alerts in the US due to the Canada fire, which makes the sky in some of the country’s biggest cities a murky brown and saturates the air with harmful pollution. Eastern US states, including New York, Massachusetts, and Connecticut, issued alerts as hundreds of wildfires burned in Canada.
- Hundreds of fires are burning in Canada, from the western provinces to Nova Scotia and Quebec in the east, where there are more than 150 active fires in a particularly fierce start to the summer season.
- The layoffs continue as companies across the globe continue to lay off thousands of employees. An analysis of the Intellizence Layoff Dataset indicates companies continued to announce layoffs in May 2023. Technology companies cut the most jobs, followed by media and financial services.
- Over 436 companies announced terminations in May. Major layoff announcements were – Verizon (6000), Meta (6000), Ford (1300), Dreyer’s Grand Ice Cream (1015), and JP Morgan (1000).
May U.S. Retail Sales Remain Steady, Up +7.2% YoY
According to Mastercard SpendingPulse™, which measures in-store and online retail sales across all forms of payment, U.S. retail sales remained steady, up +7.2%* Year-Over-Year in April.
Key trends for April reinforce consumer resilience in the face of inflation and highlight seasonal spending across sectors and channels. Of note:
- In-store sales were up +10.0%, while e-commerce sales are down -1.8% compared to last year, reflecting consumer demand to get out.
- Consumers refreshing their wardrobes for potential summer travel and the warmer months ahead contributed to continued growth for Apparel (+10.8% YOY) and Department Stores (+15.7% YOY).
- Furniture and Furnishing sales, which saw the seventh consecutive month of positive growth, were up +3.8% YOY.
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