PNC economists provide insight into key indicators that may have an impact on current business performance and the path ahead.

Gross Domestic Product (GDP)

  • Real GDP growth in the first quarter of 2024 was revised slightly lower in the second estimate from the Bureau of Economic Analysis, to 1.3% at an annual rate, from 1.6% growth in the advance estimate. Much of the slowing in economic growth in the first quarter came from reduced investment in inventories and a larger trade deficit. Demand remained strong, with consumer spending up 2%. Business fixed investment and investment in housing were also positive for growth in the first quarter.
  • The second estimate for GDP in the first quarter does little to change the outlook. Growth is slowing to a more sustainable pace of around 2% over the long run, based on growth in the labor force and productivity growth (output per worker). Slower economic growth will reduce inflationary pressures in the U.S. economy, helping bring inflation back to the Federal Reserve’s 2% objective. 
  • Inflation, after picking up somewhat in the first quarter, should slow again through the rest of this year. That will allow for the Federal Open Market Committee to cut the federal funds rate a couple of times in the second half of 2024 and again a few times in 2025, contributing to a slight acceleration in economic growth next year. 

Personal Income and Consumer Spending

  • Nominal personal income increased 0.3% in April from March, according to the Bureau of Economic Analysis. Nominal after-tax income was up 0.2% for the month. Nominal consumer spending rose 0.2% in April. The savings rate held steady at 3.6% in April from March; this is down from 3.8% in February and 4.1% in January. 
  • The personal consumption expenditures (PCE) price index, excluding food and energy, rose 0.2% in April. This was the slowest core inflation since December. On a year-ago basis overall, PCE inflation was 2.7% in April, unchanged from March, but up from 2.5% in January and February. Core PCE inflation was 2.8% year-over-year for a third straight month, down from 2.9% in late 2023 and early 2024. 
  • The fundamentals for near-term consumer spending growth are generally solid. The labor market is historically strong, and household wealth is rising thanks to record-high stock prices and rising home values. High interest rates and inflation are drags, and households will need to increase their savings somewhat in the near term. But real consumer spending will continue to increase throughout 2024 and into 2025, albeit at a slower pace than in 2023.

Employment

  • Initial Unemployment Insurance (UI) claims rose by 3,000 to 219,000 in the week ending May 25, following a 16,000 decline in the previous two weeks, which reversed most of the 23,000 increase in the first week of May. The four-week moving average of claims, which smooths out some of the weekly volatility in this data, rose by 3,000 to 223,000, the highest since mid-September 2023.
  • Continuing claims rose by 4,000 to 1.791 million in the week ending May 18, and the four-week moving average rose by 6,000 to 1.786 million. This low level of continuing claims is evidence that the jump in initial claims in early May was not the start of a persistent rise in laid-off workers.  
  • While UI Claims are still at healthy levels in an historical context, the labor market is becoming better balanced between demand for and supply of workers. The 0.2% rise in April average hourly earnings, pulling the year-over-year rise down to 3.9%, is important evidence of wage gains moderating but still outpacing inflation. In PNC’s view, this will help pave the way for future rate cuts.

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PNC economists provide analyses and forecasts of national, regional, and global economic and financial trends. For more economic data and reports, visit www.pnc.com/economicrelease.

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