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? - 08 May 2020
Wells Fargo Economics & Financial Report / May 15, 2020
April nonfarm payrolls confirmed what we already knew—the labor market is collapsing. By the survey week of April 12, net employment had fallen by 20,500,000 jobs.
This Week's State Of The Economy - What Is Ahead? - 21 October 2020
Wells Fargo Economics & Financial Report / Oct 21, 2020
Mobility is continuing to trickle lower in several major developed market economies. The U.K., France, Italy and Canada have all seen some further modest declines in retail/recreation visits.
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? - 11 December 2020
Wells Fargo Economics & Financial Report / Dec 14, 2020
Emergency authorization of the Pfizer-BioNTech COVID vaccine appears imminent, but the virus is running rampant across the United States today, pointing to a grim winter.
This Week's State Of The Economy - What Is Ahead? - 04 September 2020
Wells Fargo Economics & Financial Report / Aug 29, 2020
Employers added jobs for the fourth consecutive month in August, bringing the total number of jobs recovered from the virus-related low to 10.5 million.
This Week's State Of The Economy - What Is Ahead? - 23 April 2021
Wells Fargo Economics & Financial Report / Apr 26, 2021
This week\'s lighter economic calendar allowed forecasters more time to assess the implications from the prior week\'s blowout retail sales report.
This Week's State Of The Economy - What Is Ahead? - 03 June 2022
Wells Fargo Economics & Financial Report / Jun 08, 2022
While talk of recession has kicked up in recent weeks, the majority of economic data remain consistent with modest growth.
This Week's State Of The Economy - What Is Ahead? - 06 December 2019
Wells Fargo Economics & Financial Report / Dec 07, 2019
The latest hiring data are an encouraging sign that the U.S. economy is withstanding the global slowdown and continued trade-related uncertainty.
This Week's State Of The Economy - What Is Ahead? - 17 March 2023
Wells Fargo Economics & Financial Report / Mar 21, 2023
Retail sales declined 0.4% during February, while industrial production was flat (0.0%). Housing starts and permits jumped 9.8% and 13.8%, respectively.
This Week's State Of The Economy - What Is Ahead? - 13 March 2020
Wells Fargo Economics & Financial Report / Mar 14, 2020
Financial conditions tightened sharply this week as concerns over the coronavirus and the economic fallout of containment efforts mounted.
