ECONOMIC INSIGHTS: WHAT'S GOING ON IN THE HOUSEHOLD SECTOR?

Data sourced from the Federal Reserve Bank of Chicago, U.S. Bureau of Economic Analysis, and U.S. Census Bureau.

STUDENTS: PHUONG DINH, THY TRAN, ARELI HERNANDEZ & SALMA KHETTAT
1, The Personal Income:

KEY INDICATORS: ANALYSIS & GRAPH: FORECAST:

Our newsletter examines key economic indicators within 1, The Chicago Fed National Activity Index: The recent CFNAI report is much better with increasing
the household sector, focusing on the Chicago Fed The CFNAI is a lagging indicator, focuses on assessing the activity of +0.05 in first quarter of 2024. We expect a rise in
National Activity Index (CFNAI), Personal Consumption overall economic activity at the national level rather than the CFNAI but the household sector will not be the
Expenditures (PCE), Personal Income, and Real Retail specifically targeting the household sector, but it still reflects contributing factor. Instead, the rise will come from production
Sales and Food Sector. We track changes over time and the conditions of the household as part of the economy. For related indicators, sales, orders and inventory categories, and
forecast future economic conditions. example, changes in employment levels, personal income, & employment related indicators.
consumer spending can impact households' financial
The CFNAI is a monthly indicator designed to gauge the situations. The significant decrease in the CFNAI indicates a For the short-term, we expect Personal Income to grow at a
national economy's performance by aggregating various slowdown in the overall economic activity and leads to steady pace, with an expected monthly increase of 0.4% to
economic indicators, including production and income, decreased consumer spending, reduction in investment, 0.6%. This conclusion is based on the past database of job
employment, personal consumption, and housing market lower home sales and even declining property values. openings, the Fed Personal Income outlook and wage
activity. It provides policymakers, economists, and Example: In the recession (1981-1982, 2007-2008 and the inflation. For the long-term, we think Personal Income will also
Personal Income reflects the total income of individuals
investors with valuable insights into the state of the 2020 Covid-19 pandemic) that CFNAI falls gradually below depend on broader economic policies, including tax reform
received from all sources, and influences the spending
economy, helping them make informed decisions. the gray bar (average). When the economy is stable, the lines and investment in social infrastructure, which could
activities. Based on personal money capacity, demand for
are then above the gray bar. significantly affect disposable income.
products and services can change. For sectors such as retail,
Personal Consumption Expenditures (PCE) look at the value
entertainment, beauty services, etc., personal income will
of services and goods that are purchased by, or on the For PCE, taking into account the last 3 months' trend, we
provide an informative way to forecast potential consumer
behalf of, ‘persons' who reside in the United States” (BEA).
It is measured by looking at what consumers are spending
METHODOLOGY
spending. In this figure, we can observe that Personal Income
predict continuous growth in next month’s report. Using
historic and past newsletter trends, we predict that PCE will
& Household net worth share the same up-ward long-term
on and looks at services and goods individually. PCE also increase 160 billion next month. This would assume a 0.6%
trends. As one goesLet
up,people know how
the other you did your
increases study.
as well.
accounts for third party spending. Additionally, PCE Methods can vary depending on the subject or growth in services and a 0.4% growth in goods.
includes consumption of “nonprofit institutions to provide results you want to see. These methods can
2, Real Retail Sales and Food Sector:
include:
services to households, household purchases of used During periods of economic stress, real retail sales showed The National Retail Federation (NRF) forecasts that retail
goods, and the purchases of goods and services by U.S. early signs of divergence from the trend, potentially acting
Interviews
sales will increase in 2024 between 2.5% and 3.5% to between
residents in foreign countries” (Investopedia, 2024). as a leading indicator. Surveys $5.23 trillion and $5.28 trillion during NRF’s fourth annual
2, Personal Consumption Expenditures:
Comparison studies State of Retail & the Consumer virtual discussion. A tight labor
It's a good measure for the household sector as it helps Example: The COVID pandemic resulted in extreme drop from
Experiments
According to the BEA, Personal Income measures the total the trend but sales quickly increased back up, surpassing the market, with its robust job growth and wage gains fueling
looking at spending changes in certain types of goods and
amount of income individuals get. Personal Income You can
trend line in March 2021 asalso show studies of existing
COVID-recession recovery. Real consumer spending, is expected to cool in 2024.
services to give an overall outlook of the economy from the
includes compensation (wage, salary, benefit), rentals & literature that were used as references.
retail sales remained above the trend for 18 months until
household perspective. Historically, PCE has been a leading
properties, interests & dividends, some kind of government August 2022.
indicator for the housing sector as it’s expected to fall before
transfer payment such as social security, non-cash benefits
like Medicaid, and employer contributions to health &
a recession because consumer spending behavior starts Write a caption that will CONCLUSION:
declines before a recession. clearly explain what this
pension plans. Looking at the Personal Income, we can graphic is about and how All of the variables have been increasing over the past three
it relates to the study.
have an overview of an individual's or household's earning months consistently. Consumption has been on the rise which
capacity based on the current economy. supports the increase in all four variables within the household
sector. PCE, Personal Income, and Retail-Food-Beverage Sales
The Real Retail Sales & Food Sector includes 2 variables: have witnessed continuous and steady growth over the past
Real Retail Sales (RRS) and Food and Beverages Services newsletter. The CFNAI can influence monetary policy
Sales (FBSS). RRS measures the total revenue generated decisions by the Federal and cannot be determined directly
by retail establishments adjusted for inflation, reflecting from consumers. Despite the neutral contribution from the
consumer spending patterns. FBSS measures the total personal consumption & housing category, the recent increase
Some limitations of the PCE measure is some classification Use illustrations to
revenue generated by food and beverage services, in CFNAI signals a potential shift in economic activity.
errors of goods and services which might skew the data showcase your data in a
reflecting consumption trends in the hospitality industry. visual form.
Using only Retail and Food-Beverages Sales to analyze the
(Liberto, 2024) during data collection process. It’s important
Both data is collected through monthly surveys constructed Household sector has limitations, such as not capturing shifts Overall, analyzing Household indicators like Personal Income,
to recognize that some categories might be slightly
from Advance Retail and Food Services Sales (RSAFS) and in consumer preferences, structural changes, economic CFNAI, PCE and Retail Sales, we observed a cohesive overall
inaccurate, such as goods that might be categorized into two
adjusted using the Consumer Price Index (CPI) shocks and policy changes. story of economic recovery.
sections but only be classified in one.
.