US Economy September 2024

Stocks ended August in the green despite a very tumultuous start to the month. Fed reassurance that the economy is doing well but not overheating firmed up expectations of an interest rate cut in September and the DOW closed above 40,000 for the second consecutive month.
 
Consumer Spending Rises 0.5%
Consumer spending rose 0.5% in July after rising 0.3% in June. Adjusted for inflation, real consumer spending rose 0.2% in June. Consumer spending remains a strong indicator the economy is on solid footing. That means the Fed will probably stick to a 0.25% rate cut in September rather than a more aggressive half-point cut. Personal income rose 0.3% last month after gaining 0.2% in June. Wages climbed 0.3% after increasing 0.2% in June. Consumers are also saving less and tapping savings to fund their spending. The saving rate dropped to 2.9% in June, the lowest level since June 2022.
 
Consumer Prices Rise 0.2%
The Consumer Price Index (CPI) rose 0.2% in July after falling 0.1% in June and year-over-year inflation dropped to 2.9% after falling to 3.0% in June. Core prices rose 0.2% in July after rising 0.1% in June and year-over-year core inflation fell to 3.2% after falling to 3.3% in June. Core goods prices fell more than expected, led by a 2.3% decline in used vehicle prices. Core services inflation was hotter than anticipated, led by rebounds in inflation for housing, recreation and communication services. The core CPI inflation rate peaked at a 40-year-high of 6.6% in September 2022. The personal consumption expenditures (PCE) price index rose 0.2% last month after an unrevised 0.1% gain in June and was up 2.5% year over year. Excluding the volatile food and energy components, the PCE price index rose 0.2% last month, matching the increase in June. The Fed relies on PCE as a measure of how the economy is doing compared to the Fed’s 2.0% inflation target.
 
Consumer Confidence Rises to 103.3

The New York-based Conference Board’s Consumer Confidence Index rose to 103.3 in August after rising to an upwardly revised 101.9 in July.*

• The Present Situation Index rose to 134.4 after falling to an upwardly revised 133.1 in July.
• The Expectations Index rose to 82.5 in August after rising to an upwardly revised 81.1 in July. A level of 80 or below historically indicates consumers expect a recession.
• Confidence remained within the same narrow range it’s been for the past two years as strength in the current job situation continues to outweigh concerns about the future.
• 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 Drops to 4.2% 

• The unemployment rate dropped to 4.2% in August after rising to 4.3% at the end of July. Unemployment was 3.5% at the beginning of the pandemic in March 2020.
• The economy added 142,000 new jobs but job growth for July and June was revised down by a total of 86,000 jobs. It was the 23rd consecutive month of job growth.
• Much of the increase in July’s unemployment rate was the result of temporary layoffs and many of those people went back to work in August.
• Construction lost 34,000 jobs; retailers also cut jobs.
• Gains were about 30% below the average of the previous twelve months.

 
Chicago PMI Rises to 46.1
The Chicago PMI rose to 46.1 in August after falling to 44.3 in July, leaving the index below the break-even point of 50. The Index has been below 50 for the past 22 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 0.1%
The Producer Price Index (PPI) rose 0.1% in July after rising 0.2% in June. The PPI was up just 2.2% year over year after being up 2.6% in June. Stripping out volatile food and energy prices, core PPI remained unchanged in July and was up 2.4% from July 2023 after being up 3.0% year over year in June. PPI peaked at an 11.7% year-over-year increase in March 2022. The hotter-than-expected reading put a damper on excitement over falling consumer prices.
 
Q2 GDP Grows 3.0%
Q2 GDP was revised up to show GDP grew 3.0%, an improvement over the strong 2.8% growth reported in the first reading from the Commerce Department. Most of the upward revision was due to a more robust pace of consumer spending, which grew at a 2.9% annualized rate, up from 2.3% in the first reading. Goods surged 2.5% after falling 2.3% in the first quarter, and services increased 2.2% after rising 3.3% in the first quarter. The core personal consumption expenditure index (PCE) was revised down slightly to a 2.8% increase from the initial estimate of a 2.9% gain. The PCE increased 2.6% during the second quarter, the slowest pace since the first quarter of 2021 and a big slowdown from the 3.4% pace in Q1. Core PCE inflation, which excludes food and energy prices, increased 2.9% during the second quarter, down from 3.7% in Q1. 

Next Section

​© Robert Bosch Tool Corporation.  All rights reserved, no copying or reproducing is permitted without prior written approval.