Economic Research and Data

Economic Data Updates :: April 2007

Personal Consumption Expenditure Price Indexes

Like the Consumer Price Index (CPI), the Personal Consumption Expenditure Price Index (PCE) jumped 5.4 percent (annualized rate), while the core PCE rose a modest 0.6 percent. On a year-over-year basis, the core PCE inched down to 2.1 percent, its lowest growth rate in a year.

Construction Spending

Total private construction spending increased 0.2 percent in March, its second consecutive monthly increase. The gain was solely due to private nonresidential construction spending growth, which increased 2.4 percent. Private residential construction fell 1.0 percent, offsetting February's 1.8 percent rise. Private residential construction has fallen in 11 of the past 12 months and is currently down almost 15 percent from its peak in December 2005. Over this same period, private nonresidential construction has increased roughly 20 percent to new historic highs, helping to moderate the decline in total construction spending.

Personal Income and Outlays

Personal income growth exceeded expectations in March: Personal income rose a brisk 0.7 percent (nonannualized) for the second consecutive month, following a 1.1 percent jump in January. March's rise reflected a 0.7 percent rise in wages and salaries, which are currently up 4.6 percent from last year's levels. Real consumer spending was sluggish, dropping 0.2 percent, its largest monthly decline since September 2005. On a year-over-year basis, consumer spending is up 3.1 percent, in line with growth rates throughout the current economic expansion.

Consumer Sentiment

The University of Michigan/Reuters' Index of Consumer Sentiment ticked down from 88.3 in March to 87.1 in April, largely reflecting deterioration in the index's expectations component. Average expectations for inflation over the next year ticked up from 3.6 percent to 4.0 percent in April, their highest rate since last summer, while average expectations for inflation over the next 5 to 10 years ticked up from 3.3 percent to 3.6 percent in April, their highest rate since last May. The University of Michigan attributes the uptick to the recent surge in gas prices.

Employment Cost Index

The Employment Cost Index (ECI) increased 3.1 percent (annualized rate) in the first quarter of 2007, following three straight quarterly increases exceeding 3.5 percent. On a year-over-year basis, ECI growth continued to accelerate for the fourth consecutive quarter, rising to 3.5 percent (from 3.3 percent). The ECI for private-industry workers rose 2.3 percent (annualized) during the first quarter, reflecting a 4.3 percent rise in wages and salaries and a 1.2 percent decline in benefit costs—the first quarterly decline in benefit costs since the beginning of the data series in 1980.


Real GDP grew at an annual rate of 1.3 percent in the first quarter of 2007, a bit below expectations, and down from 2.5 percent annualized growth in the fourth quarter of 2006. This month's sluggish real GDP growth was the slowest quarterly growth rate since the third quarter of 2003. International trade had much to do with the downturn: Export growth declined considerably, falling 1.2 percent (annualized) in the first quarter of 2007 following a 10.6 percent (annualized) increase in the previous quarter. Import growth compounded the issue, increasing at an annual rate of 2.3 percent in the first quarter after posting a decrease of 2.6 percent in the previous quarter. Real personal consumption expenditure (PCE) growth fell slightly from 4.2 percent (annualized) in the fourth quarter of 2006 to 3.8 percent, while real residential fixed investment continued its dramatic decline, plunging an annualized 17 percent during the quarter.

New Home Sales

New home sales increased by 2.6 percent in March after having declined 18 percent since the beginning of this year. The sales pace has fallen steadily since mid-2005 and is currently 37.2 percent below the last peak seen in the series, in July 2005. The median sales price of new homes increased 0.9 percent in March, its fifth increase in the past six months. On a year-over-year basis, prices are up 6.4 percent, despite sales being down 23.5 percent. The months’ supply of unsold new homes at the current sales pace fell slightly from its recent peak of 8.1 months, to 7.8 months.

Durable Goods

New orders for durable goods rose 3.4 percent in March, the fourth increase in the last five months. However, new orders are down 2.1 percent from last March. March's gain reflected an 8.0 percent increase in transportation equipment, which was in part caused by a 38 percent spike in nondefense aircraft orders. New orders excluding transportation orders rose 1.5 percent, while nondefense capital goods orders excluding aircraft orders rose 4.7 percent. Shipments rose 0.8 percent during the month, following two months of declines, but are still down 0.6 percent from last March.


Existing Home Sales

Existing single-family home sales fell 9.5 percent in March, the largest decline in this series in nearly 20 years. The decline more than offset the steady gains seen in the previous two months and brings the annualized sales pace down to 5.32 million units, its lowest level since mid 2003 (and 15.6 percent below its peak in September 2005). The National Association of Realtors attributed the abnormally large decline in sales to unseasonably cold weather in February, as well as restrained subprime lending.

Industrial Production

Industrial production fell 0.2 percent in March, following a 0.8 percent increase in February. The decline reflected a 7.0 percent plunge in utilities production, which partially offset February's 7.6 percent jump. The Federal Reserve Board attributed this variation to swings in temperature from below-seasonal norms in February to above-seasonal norms in March. Meanwhile, manufacturing production posted a strong 0.7 percent increase, reflecting broad-based gains across manufacturing industries. Capacity utilization in the manufacturing sector posted its first increase of the year, rebounding to 80.1, after falling in five of the six previous months.

Housing Starts

Single-family housing starts rose 2.0 percent (nonannualized rate) in March, following a 6.7 percent increase in February. Prior to this release, single-family housing starts had not increased for two consecutive months since July 2005. Despite the recent rebound, housing starts remain about 33 percent below their peak of 1.814 million units, reached in January 2006, and are similar to levels seen in the mid-1990s.