US Economy December 2024

Markets hate uncertainty and would have risen regardless of who won the election, but were especially cheered by the prospects of a pro-tax cuts, anti-regulations administration in Washington next year. All three major indexes posted healthy gains for the month.
 
Consumer Spending Rises 0.4%
Consumer spending rose a solid 0.4% in October and spending for September was revised up to a 0.6% gain. The increase beat economists’ expectations. Consumer spending was up 3.7% year over year, the most since the first quarter of 2023. Core consumer spending was up 0.1% for the month and 2.7% year over year. A 0.4% increase in spending on services accounted for all of the gains. Spending on durable and non-durable goods fell. The savings rate, meanwhile, rose to 4.4% from 4.1%, slightly below average but solid enough to keep spending at current levels.
 
Consumer Prices Rise 0.2%
The Consumer Price Index (CPI) rose 0.2% in October, marking the fourth consecutive month the index has been up 0.2%. Year-over-year inflation rose to 2.6% after dropping to 2.4% in September. Core prices rose 0.3% in October after rising by the same percentage in September and were up 3.3% year over year. Core CPI inflation  peaked at a 40-year-high of 6.6% in September 2022. Core prices for goods fell but core prices for services remain stubbornly high. The personal consumption expenditures (PCE) price index increased 0.2% in October after rising 0.2% in September. In the 12 months through October, the PCE price index increased 2.3% after being up 2.1% in September. The Fed tracks the PCE price measures for their 2% inflation target.
 
Consumer Confidence Rises to 117.7

• The New York-based Conference Board’s Consumer Confidence Index rose to 117.7 in November after rising to an upwardly revised 109.6 in October.*
  
• The Present Situation Index rose to 140.9 in November after jumping to 138.0 October.
  
• The Expectations Index inched up 0.4 point to 92.3 in November after rising more than 6 points to 89.1 in October. The reading has now been above 80 for the past three months; a level of 80 or below historically indicates consumers expect a recession.
  
• Confidence is now near the top of the range that has prevailed for the past two years.
  
• Consumer Confidence fell to 86.9 at the onset of the pandemic in March 2020.

*A level of 90 indicates that the economy is on solid footing; a level of 100 or more indicates growth. Analysts caution that the real driver behind consumer spending is income growth and that labor market trends are a more accurate predictor of consumer behavior.
 
Unemployment Rises to 4.2% 

• The unemployment rate ticked up to 4.2% in November after holding steady at 4.1% in October. Unemployment was 3.5% at the beginning of the pandemic in March 2020.
  
• The economy added a solid 227,000 new jobs after eking out a gain of just 12,000 new jobs in October. Job growth was above expectations. It was the 26th consecutive month of job growth.
  
• Jobs in construction held steady. Retail trade lost 28,000 jobs in November, after showing little net employment change over the past 12 months.
  
• Job growth overall may have been artificially elevated since disruptions caused by Hurricanes Helene and Milton and the Boeing strike that idled 33,000 workers contributed to the drop in job growth in October.
  
• Average hourly earnings rose by 13 cents, 0.4%, to $35.61 and have rises 4.0% over the past 12 months.

 
Chicago PMI Falls to 40
The Chicago PMI fell to 40 in November after falling to 41.6 in October, leaving the index still below the break-even point of 50. The Index has been below 50 for the past 24 months. Looking back to when the series began in 1967, the PMI has ranged from 20.7 in June 1980 to 81.0 in November 1973. 
 
Wholesale Prices Rise 0.2%
The Producer Price Index (PPI) rose 0.2% in October after being unchanged in September. Economists had expected the PPI to rise 0.1%. The PPI was up 2.4% year over year in October, the highest year-over-year increase in four months. Prices for services rose 0.2% while prices for goods fell 0.2%. Core producer prices, which exclude prices for food, energy and trade services, rose 0.3% in October after being up just 0.1% in September. Core prices were up 3.5% year over year, a bump from 3.2% in September. PPI peaked at an 11.7% year-over-year increase in March 2022.
 
Q3 GDP Unrevised at 2.8%
Q3 GDP growth was unrevised at a solid 2.8% in November after Q2 GDP grew 3.0%, according to the second reading from the Commerce Department. Slight downward revisions to consumer spending, government outlays and exports were offset by upgrades to private inventory accumulation and business investment as well as state and local government spending.
 
Personal consumption expenditures grew 3.7%, ahead of 3% forecasts and up from 2.8% in Q2. PCE inflation increased 1.5%, below the Fed's 2% target. That should make it easier for the Fed to justify additional rate cuts. It also marked a slower pace of price growth than the 2.5% rate in Q2. Core PCE inflation, which excludes the more volatile food and energy prices, increased just 2.2% during the third quarter, compared with a rate of 2.8% in the second quarter.
 
Fed Cuts Rates Again
The Fed approved another quarter-point rate cut two days after the election, bringing the benchmark rate to between 4.5% and 4.75%. All 12 Fed members backed the widely expected cut. Fed Chair Jerome Powell said it is too soon to say how the policies of the next administration will be put into place but in the near term the election will have no impact on their policy decisions. He also stated he had no intention of leaving the Fed before his four-year term expires in May 2026, and added that the president does not have the legal authority to remove him or other Fed personnel from their positions before their terms expire. 

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