Economy in Brief: May 2023

• Spending on goods declines; service outlays increase.
• Real disposable income improves.
• Core price inflation weakens further.

• Transportation orders excluding aircraft & vehicles advanced in April.
• Computers, electrical equipment & metals orders all decreased.
• Shipments of all manufacturers were down, while inventories reversed March decline.

• $96.77 billion deficit in April, larger than expected.
• Exports decline 5.5%, the deepest m/m fall since April ’20, reflecting drops in most end-use categories.
• Imports rebound 1.8%, the first m/m increase since January.

Lingering concerns about US debt ceiling negotiations have left financial markets on the back foot over the past few days. But incoming economic data this week have not helped. May’s flash PMIs, for example, disappointed to the downside in Europe with the details revealing stubbornly high price pressures in the service sector. Those details found an echo in a much stronger-than-expected UK inflation print for April as well. Against this backdrop our charts this week firstly home in on market expectations for Fed policy (in chart 1). We then contrast these with the more downbeat messages for global growth that are being signalled by falling copper prices and negative global growth surprises (in chart 2). We turn next to the sobering messages from the stalling pace of GDP growth in Asia’s more developed economies (in chart 3) and one reason for this (in chart 4), namely soggier world trade growth and rising inventories. Our last two charts then return to inflation issues and examine the relatively high level of energy price inflation in the UK compared with the US and to a lesser extent the euro area (in chart 5). This is then contrasted with the firming trend for core inflation in the UK and the ebbing trend in the US and euro area (in chart 6).

• Inventories continue to subtract substantially from growth.
• Consumer spending stays strong as auto buying surges; business investment slows.
• Price index is unrevised & firm.
• After-tax profitability declines again.

• Composite Index improves to -1 in May, reflecting rises in production to -2, new orders to -14, and employment to a positive 7.
• Price indexes fall, w/ prices paid for raw materials having cooled significantly (lowest since July ’20) and prices received for finished goods having eased somewhat.
• Expectations for future activity remain flat in positive territory.

• Sales fall sharply y/y.
• Monthly changes are mixed amongst regions.