January Inflation, RIP Apple Car, and the U.S. GDP Growth Trajectory

Editor’s Note: Happy Friday, dear reader. My birthday is on Monday — which is always a bummer (thanks, Leap Year). So I’ll be spending the weekend doing some early celebrations.

Anyway, let’s get to it!

The January PCE Report Is… Not Terrible

Yesterday, the Bureau of Economic Analysis reported on the Personal Consumption Expenditures (PCE) price index for January. The markets had been bracing for the news.

And luckily enough, although the index showed that inflation continued to rise last month, the reading met analyst expectations.

In January, the core PCE — which strips out volatile food and energy costs — rose 0.4% for the month and 2.8% on a year-over-year basis.

And headline PCE — which tosses those food and energy prices back in — rose 0.3% from the previous month and 2.4% year over year.

At the same time, personal income rose 1% — higher than the forecast of 0.3%. Meanwhile, spending dropped by 0.1%. Analysts had been looking for a 0.2% boost.

Breaking down the PCE a bit, prices for services rose 0.6% last month as prices for goods fell by 0.2%. On a year-over-year basis, service prices rose by 3.9% while goods prices tumbled by 0.5%.

And although food prices rose by 0.5%, energy costs dropped by 1.4% last month. On a year-over-year basis, food prices rose by 1.4% and energy prices dropped by 4.9%.

Although these results met analyst expectations — and although core PCE rose by the lowest amount since February 2021 — the headline January PCE reading was still higher than the Federal Reserve’s target of 2% year-over-year inflation.

The markets were relieved that there was no nasty sticky inflation surprise. Stocks rose immediately on the report.

No More Apple Car

Apple (NSDQ: AAPL) has ended Project Titan. The initiative would have seen Apple develop and produce a self-driving electric vehicle (EV).

There has been plenty of speculation concerning the project in the past 10 years. Apple started hiring executives from the automotive industry back in 2015. And in 2017, the California Department of Motor Vehicles granted the company a permit to start testing autonomous vehicle technology.

Hopes for an Apple Car also surged just before the COVID pandemic when Apple acquired a self-driving car technology startup, Drive.ai. The company also owns several patents related to car technology, including a patent for self-adjusting tinted windows.

In addition, now that sales of EVs have failed to live up to expectations, companies are starting to lower their bullish bets on this technology.

“Apple looked at the market in the last 18 months or so and saw margins are eroding fast,” JSC Automotive Consulting’s Jochen Siebert said this week. “They are not joining a market that does not provide superior margins, because they know even if they go in, how would they differentiate themselves?”

In addition, Bloomberg reported that Apple was also struggling to successfully harness self-driving technology. Apparently, there had been a few false starts, with the company abandoning its efforts to design a car without neither pedals nor a steering wheel.

According to Bloomberg, Apple will transfer many of its Project Titan employees to its artificial intelligence (AI) unit.

So RIP, Apple Car. You had the potential to be a huge disruptor in the auto industry.

Consumer Confidence Heads South

This week, a report from The Conference Board indicated that consumers are finally getting fed up with the economy.

According to the firm’s U.S. Consumer Confidence Survey for February, the American consumer’s outlook on the economy is showing signs of deterioration after three months of optimism.

The Consumer Confidence Index fell from 110.9 in January to 106.7 this month. That’s the first drop registered since November. According to Bloomberg, economists had been expecting the index to rise to a reading of 115.

“The drop in confidence was broad-based, affecting all income groups except households earning less than $15,000 and those earning more than $125,000,” The Conference Board’s chief economist, Dana Peterson, said in a statement.

“Confidence deteriorated for consumers under the age of 35 and those 55 and over, whereas it improved slightly for those aged 35 to 43.”

At least concerns about inflation appear to be letting up. This month, the survey showed that inflation expectations ticked lower to 5.2%. In 2022, when inflation was running at a record-hot pace, expectations hit a high of 7.9%.

Instead, concerns about the job market seem to be weighing particularly heavily on Americans’ minds. The Conference Board’s Expectations Index — which gauges the collective short-term outlook for conditions in the labor market, as well as income and business — dropped from a revised 81.5 reading in January to 79.8 this month.

This could spell trouble, given that readings below 80 have traditionally heralded recessions.

According to The Conference Board, consumers are also getting worried about this year’s upcoming presidential election.

“February’s write-in responses revealed that while overall inflation remained the main preoccupation of consumers, they are now a bit less concerned about food and gas prices, which have eased in recent months,” Peterson said.

“But they are more concerned about the labor market situation and the U.S. political environment.”

A Return to Pre-Pandmic Levels?

Consumers may be feeling wary, but overall, the economy has proved to be more resilient than we could have hoped.

This week, the Bureau of Economic Analysis reported that the U.S. real GDP rose by 2.5% in 2023. That’s an impressive increase from the 1.9% reported for 2022.

In 2017 dollars, the U.S. GDP totaled $22.37 trillion — a more than 8% increase from the last pre-pandemic year, 2019.

That means real GDP managed to grow at a rate of 2% over the past four years, despite all of the chaos caused by the pandemic.

Take a look:

Infographic: U.S. Economy Returns to Pre-Pandemic Growth Pat | Statista You will find more infographics at Statista

P.S. Interested in disruptive technology? Cryptocurrency represents a lasting revolution in finance, investing, and consumer behavior.

Consider this: Bitcoin (BTC), the leading “blue chip” cryptocurrency, gained a whopping 156% in price in 2023. This bullishness has extended throughout the crypto segment and the momentum is likely to continue throughout 2024.

Every portfolio should have some sort of crypto exposure. But you need to be informed, to make the right choices. Start receiving our FREE e-letter, Crypto Investing Daily. Click here now!