Personal Consumption Expenditures

Even better than retail sales

Retail sales is a good metric because it provides an indication of consumer activity. Given that this is a consumer-driven economy, any data on what they are doing is helpful. But, there is an even better monthly consumer-focused metric:

Personal Consumption Expenditures (“PCE”) is an unbelievably great indicator. It is even better than retail sales because it tells us exactly what is happening with the full consumption component of Gross Domestic Product (“GDP”).

Given that PCE comprises almost 70% of Gross Domestic Product and given that GDP is super important and given that GDP is a quarterly indicator, it’s clear that a monthly metric like this is useful for getting a read on the economy.

Expect the next print of PCE to be pretty bad (just like all the other economic numbers lately). But, remember that GDP will cover a full quarter and that January and February weren’t that bad. So, I’m not expecting anything catastrophic for 2020Q1 as a whole. 2020Q2 on the other hand…well, let’s just hope the more optimistic scenarios play out.