Macroeconomic data released this week reveal that gradually easing price pressures are promoting consumer resilience, while high financing costs continue to bite producers. The Consumer Price Index (CPI) rose just 0.1% in November, amounting to a 3.1% year-to-year upswing. The headline print was muted by a downdraft in gasoline prices and ongoing moderation in food costs. In contrast, firmer services prices continue to prop up core inflation. A 0.3% monthly uptick in core prices translated to a 4.0% annual gain in November, unchanged from October’s rate.
Despite core CPI seemingly stuck at double the Fed’s inflation target, there are encouraging signs of more progress to come. A recent streak of softer prints brought the three-month annualized core rate to 3.4% through November, suggesting that disinflation has more room to run in the coming months. Gradually cooling labor costs should also help to keep a lid on services inflation, while stalling wholesale prices reduce the risk of price reacceleration. That said, price pressures have not completely abated. This week, we also received the latest NFIB Small Business Economic Trends Survey. In November, the net share of small businesses expecting to raise prices in the coming months reached its highest reading in one year (34%), consistent with a bump in plans to raise compensation.
Nevertheless, inflation expectations are adjusting lower. A survey from the New York Fed found that consumers anticipate a 3.4% annual increase in prices over the next year, the softest expectation since April 2021. A solid string of slower inflation readings also led FOMC members to take down their own forecasts, supporting their decision to hold rates steady for the third straight meeting in December. In the latest Summary of Economic Projections (SEP), the median FOMC participant expected core PCE inflation to print at 3.2% this year, down from 3.7% in the September SEP. These adjustments give a nod to ongoing progress on inflation, while acknowledging that price growth is likely to proceed above target. See Interest Rate Watch for more insight into how these developments affect our outlook for Federal Reserve policy.
Receding inflation appears to be bolstering consumer staying power. Retail sales rose 0.3% in November, outshining expectations of a slight decline. Based on our estimates, sales mounted a more impressive 0.9% increase on an inflation-adjusted basis, the fastest pace since last January. In addition to demonstrating enduring consumer resilience, November’s print also signals a solid holiday shopping season this year. Holiday sales are now on track to grow just under 5.0% on an annual basis. If realized, this spending pace would be a downshift from post-pandemic norms while still remaining above the longer-term average. Finally, a 0.9% real increase in control group sales in November set up GDP to advance a touch faster than we currently expect in Q4.
This Week's State Of The Economy - What Is Ahead? - 28 August 2020
Wells Fargo Economics & Financial Report / Aug 26, 2020
After a revised look at GDP this week suggested the second quarter may not have been quite as bad as first estimated, attention shifts to the current quarter.
September 2020 Economy At A Glance
Wells Fargo Economics & Financial Report / Sep 19, 2020
A March survey by the Federal Reserve Bank of Dallas found most exploration firms need West Texas Inter-mediate (WTI) at $49 per barrel or higher to profitably drill a well.
This Week's State Of The Economy - What Is Ahead? - 16 July 2021
Wells Fargo Economics & Financial Report / Jul 30, 2021
Visiting from Texas, it felt more like fall, which like the Texas cold-snap last February just goes to show that it’s a case of what you’re used to.
This Week's State Of The Economy - What Is Ahead? - 18 March 2022
Wells Fargo Economics & Financial Report / Mar 21, 2022
it was a big week for economic news as the Astros allowed the TWINS of all teams to sign Carlos Correa to the type of short-term deal that the Astros have historically been open to.
This Week's State Of The Economy - What Is Ahead? - 05 April 2024
Wells Fargo Economics & Financial Report / Apr 09, 2024
Nonfarm payrolls expanded 303K in March, surpassing all estimates submitted to Bloomberg. The continued strength in hiring suggests less urgency for policymakers at the Federal Reserve to lower the target range of the fed funds rate.
This Week's State Of The Economy - What Is Ahead? - 24 April 2020
Wells Fargo Economics & Financial Report / Apr 27, 2020
Oil prices went negative for the first time in history on Monday as the evaporation of demand collided with a supply glut. In the past five weeks, 26.5 million people have filed for unemployment insurance, or more than one out of every seven workers.
This Week's State Of The Economy - What Is Ahead? - 28 April 2023
Wells Fargo Economics & Financial Report / May 03, 2023
U.S. Economy expands but at a weak rate. Regional bank failures cause corporate investment spreads to widen again. House Republicans pass bills that affect the debt ceiling.
This Week's State Of The Economy - What Is Ahead? - 31 January 2020
Wells Fargo Economics & Financial Report / Feb 01, 2020
Mexico’s economy has slowed notably over the last year, with the economy contracting again in Q4, indicating a full-year contraction for 2019.
This Week's State Of The Economy - What Is Ahead? - 01 April 2022
Wells Fargo Economics & Financial Report / Apr 05, 2022
The key factor that will drive interest rates is the Fed’s belated effort to rein-in inflation.
This Week's State Of The Economy - What Is Ahead? - 20 December 2019
Wells Fargo Economics & Financial Report / Dec 21, 2019
President Trump became the third president in U.S. history to be impeached by the House, but removal by the Senate is highly unlikely. The House also passed the USMCA, which should be signed into law in early 2020.
