Fed Impact Felt as Personal Spending and Inflation Soften in December

The core personal consumption expenditure price index (Core PCE prices) in the US, which exclude food and energy, rose by 0.3 percent month-over-month in December of 2022 as expected.  The annual rate, the Federal Reserve’s preferred gauge of inflation, fell to 4.4 percent from 4.7 percent, also within expectations.  Notably real personal spending declined 0.3% month-over-month in December.  We are seeing a continued moderation of inflation pressures; however, services inflation was up 0.5% month-over-month following a 0.3% increase in November … Continue reading “Fed Impact Felt as Personal Spending and Inflation Soften in December”

US Economy a Long Way from Recession in Q4, GDP Grew 2.9%

The US economy increased at an annual rate of 2.9% in the fourth quarter, ahead of consensus 2.6%. The report followed a 3.2% increase in the third quarter. The report suggests the economy was resilient and held on in the fourth quarter in the face of rising interest rates, moderating consumer spending (and inflation), political uncertainty and falling sentiment. The GDP Price Deflator was up 3.5% (consensus 3.2%) following a 4.4% increase in the third quarter. The Q4 PCE Price … Continue reading “US Economy a Long Way from Recession in Q4, GDP Grew 2.9%”

Federal Reserve Beige Book Highlights Housing Markets Continued to Weaken

The Federal Reserve released its Biege Book Wednesday prepared at the Federal Reserve Bank of Cleveland based on information collected on or before January 9, 2023.  The report was consistent with what we have seeing with economic data released, not a lot has changed over the past month, the economy is weakening. It was reported housing markets continued to weaken, clearly higher interest rates have further dented home sales and household finances. Notably many retailers noted increased difficulty in passing … Continue reading “Federal Reserve Beige Book Highlights Housing Markets Continued to Weaken”

December ISM Manufacturing PMI Lowest Since May 2020, Second Straight Month Sub-50.0%

The December ISM Manufacturing Index dropped to 48.4% (consensus 48.5%) from 49.0% in November, reflecting a general contraction in manufacturing activity. The ISM hit its lowest level since May 2020 and marks the second straight month with a sub-50.0% reading. The result was consistent with the regional Chicago PMI’s fourth consecutive month of contraction in business activity in the Chicago region. Though it increased to 44.9 points in December the weakness is deep, recovering slightly from a 30-month low of … Continue reading “December ISM Manufacturing PMI Lowest Since May 2020, Second Straight Month Sub-50.0%”

US Stagflation Risk with Real Personal Spending Flat While Core PCE Inflation Rates Too High

The core personal consumption expenditure price index (Core PCE prices) in the US, which exclude food and energy, rose by 0.2 percent month-over-month in November of 2022 as expected.  The annual rate, the Federal Reserve’s preferred gauge of inflation, fell to 4.7 percent from 4.7 percent, also with expectations.  The report reminded us of stagflation risk, real spending was flat while the inflation rates were still too high for the Fed’s liking. Federal Reserve Governor Chairman Powell reminded us at … Continue reading “US Stagflation Risk with Real Personal Spending Flat While Core PCE Inflation Rates Too High”

Consumer Spending Helped US Economy Grow Stronger than Expected in Third Quarter

The US economy has recovered strongly in the third quarter, growing at an annualized 3.2% on quarter in Q3 2022, ahead of the second estimate and consensus 2.9%. Significantly higher than the advance estimate +2.6% and Q2 GDP of -0.6%. The report ended a two-quarter streak of negative GDP prints. The report suggests the economy was resilient held in the third quarter to rising interest rates and why the Fed continued to raise rates aggressively in the third quarter. The American … Continue reading “Consumer Spending Helped US Economy Grow Stronger than Expected in Third Quarter”

US Services Business Activity Accelerated in November, ISM Non-Manufacturing Shows

The ISM Non-Manufacturing Index for November increased to 56.5%, well ahead of a consensus 53.5% and up from 54.4% in October. The report follows the strong November jobs report released Friday indicating the economy is still hotter than the Federal Reserve would like at this time. Business activity for the non-manufacturing sector, which comprises the largest percentage of U.S. economic activity, strengthened in November, aiding the view that the Fed will keep rates higher for longer. The November reading marks the … Continue reading “US Services Business Activity Accelerated in November, ISM Non-Manufacturing Shows”

American Factory Orders Rise in October with Rebounding Business Spending

US factory orders for manufactured goods rose 1.0% month-over-month in October higher than the consensus 0.7% and following an unrevised 0.3% increase in September. Shipments of manufactured goods jumped 0.7% after increasing 0.3% in September. The US has seen a quick rebound in business spending, highlighted by the 0.6% increase in nondefense capital goods orders excluding aircraft, and the sizable jump in shipments of nondefense capital goods excluding aircraft (+1.5%) that will add favorably to Q4 GDP forecasts. US Factory … Continue reading “American Factory Orders Rise in October with Rebounding Business Spending”

US Manufacturing Contracted for First Time Since May 2020 in November – ISM

American manufacturing contracted for the first time since May 2020 in November measured by the ISM after expanding for 29 straight months. The ISM Manufacturing PMI fell to 49 in November of 2022 from 50.2 in October and more than market forecasts of 49.8. New orders (47.2 vs 49.2), supplier deliveries (47.2 vs 46.8), and backlog of orders (40 vs 45.3) all contracted faster. Ahead of Friday’s employment report and following weak AFP, Challenger and JOLTS reports employment declined (48.4 vs … Continue reading “US Manufacturing Contracted for First Time Since May 2020 in November – ISM”

Fed’s Key Inflation Measure Core PCE Rises 0.2% in October as Personal Spending Picks Up

The core personal consumption expenditure price index (Core PCE prices) in the US, which exclude food and energy, rose by 0.2 percent month-over-month in October of 2022 less than 0.3% expected.  The annual rate, the Federal Reserve’s preferred gauge of inflation, fell to 5.0 percent from 5.1 percent, below expectations of 5.2 percent.  Federal Reserve Governor Chairman Powell reminded us yesterday at the FOMC that the Fed’s key influence or measure for inflation is the core PCE index. Notably personal … Continue reading “Fed’s Key Inflation Measure Core PCE Rises 0.2% in October as Personal Spending Picks Up”