US Economy November 2024

Halloween proved to be all tricks, no treats for the markets as all three indexes turned in their first monthly loss since April. However, the DOW remained above 40,000 for the fourth consecutive month.
 
Consumer Spending Rises 0.5%
Consumer spending rose 0.5% in September after rising an upwardly revised 0.3% in August.  Gains were slightly greater than expected. 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. Annual revisions to national accounts data published in September showed stronger wages and salaries growth in the second quarter than had been previously estimated. The savings rate was also higher than previously reported. Higher incomes and savings bode well for consumer spending for the rest of the year.
 
Consumer Prices Rise 0.2%
The Consumer Price Index (CPI) rose 0.2% in September, marking the third consecutive month the index has been up 0.2%. Year-over-year inflation dropped to 2.4% in September after falling to 2.5% in August. Much of the increase was driven by an increase in rents and food prices. Core prices rose 0.3% in September after rising 0.2% in August and were up 3.3% year over year after being up 3.2% in August. Core CPI inflation peaked at a 40-year-high of 6.6% in September 2022. The personal consumption expenditures (PCE) price index increased 0.2% in September after an unrevised 0.1% gain in August. In the 12 months through September, the PCE price index increased 2.1%. That was the smallest year-over-year increase since February 2021 and followed a 2.3% advance in August. Excluding the volatile food and energy components, the PCE price index rose 0.3% after increasing 0.2% in August. The Fed tracks the PCE price measures for their 2% inflation target.
 
Consumer Confidence Rises to 108.7

The New York-based Conference Board’s Consumer Confidence Index rose to 108.7 in October after falling to 98.7 in September.*

• The Present Situation Index jumped by more than 14 points to 138.0 after falling more than 10 points in September.
  
• The Expectations Index rose more than 6 points to 89.1 in October after falling to 81.7 in September. The reading has now been above 80 for the past two months; a level of 80 or below historically indicates consumers expect a recession.
  
• Confidence remained in the same narrow range it’s been 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 Remains at 4.1%

• The unemployment rate remained at 4.1% in October after falling to 4.1% in September.  Unemployment was 3.5% at the beginning of the pandemic in March 2020.
• The economy added just 12,000 new jobs, and job growth for September was revised down to 223,000 jobs. It was still the 25th consecutive month of job growth but was the weakest job growth since December 2020.
• Construction grew modestly, adding 8,000 new jobs.
• Job growth was well below expectations of 90,000 jobs. Economists noted that job disruptions caused by Hurricanes Helene and Milton and the Boeing strike that idled 33,000 workers contributed to the drop in job growth.
• Average hourly earnings rose 0.4% after gaining 0.3% in September. Wages increased 4.0% in the 12 months through October after advancing 3.9% in September.

 
Chicago PMI Falls to 41.6
The Chicago PMI fell to 41.6 in October after inching up to 46.6 in September, leaving the index still below the break-even point of 50. The Index has been below 50 for the past 23 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 Unchanged
The Producer Price Index (PPI) was unchanged in September after rising 0.2% in August.  Economists had expected the PPI to rise 0.1%. The PPI was up 1.8% year over year in September after being up 1.7% in August. 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 0.1% after having risen 0.3% for the previous two months. Core prices were up 3.2% year over year, an improvement from 3.3% in August. PPI peaked at an 11.7% year-over-year increase in March 2022.
 
Q3 GDP Drops to 2.8%
Q3 GDP growth dropped to a still-solid 2.8% after Q2 GDP grew 3.0%, according to the first reading from the Commerce Department. Growth was driven by consumer spending, which jumped 3.7% during Q3, the biggest growth in more than a year and a sharp increase from 2.8% in Q2. Imports grew enough to be a drag on growth. The Commerce Department noted the growth in imports will probably be short-lived and was most likely due to the looming longshoreman’s strike, which was quickly settled.
 
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.
 
Private fixed investment slowed to a 1.3% annual growth rate, the weakest since the end of 2022. Investment in nonresidential structures fell at a 4% rate, but equipment investment jumped 11.1%.
 

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