There was a slew of economic data to parse through this week. While the data came in somewhat different from anticipated, the underlying details continue to paint a picture of an economy that is gradually losing momentum. The consumer price data showed a continued deceleration in inflation with the annual growth rate on the headline index slipping by a half a percentage point to 3.2% after a 3.7% year-ago increase in September. The softening in the core index (excluding food and energy) was a bit more modest, but at a 4% annual rate in October, signals a continued slowing in inflation (chart). The softer-than-expected CPI print was an encouraging development for the Fed and reinforces our view that the FOMC has ended its hiking cycle, but is still likely a ways away from outright easing policy. Market participants had a similar reaction as the yield on the 10-year Treasury security slid by about 20 bps on the CPI release and market pricing for eventual FOMC easing was pulled forward.
Some caution was baked back into expectations, however, on Tuesday amid a solid retail sales report. While overall sales slipped 0.1% in October, the control group measure, which excludes volatile categories and aligns well with consumer spending in the GDP report, rose 0.2%, signaling a still-resilient consumer. The weak portions of retail sales were tied to categories that did well earlier in this cycle when consumers were embracing their inner home-body, but which have since languished as people have returned to experiences outside the home. Furniture & home furnishing store sales, for example, slipped 2% and sporting goods & hobby stores fell 0.8%. Consumer spending may be losing momentum after a robust first half of the year, but the fire is not yet out.
That said, we still anticipate further moderation in spending. Not only are pandemic-era support factors of excess liquidity and easy access to credit fading, but real income growth has started to come under renewed pressure amid some softening in the labor market. Initial claims for unemployment insurance ticked up to 231K in the week ending November 10. While that marked the largest weekly gain (+13K) since early August, it's not meaningfully above the year-to-date weekly average of 227K. Yet, continuing claims rose to 1,865K the week ending November 4, marking the highest number of people continuing to claim unemployment insurance since the end of 2021, which signals less ease among recently laid off workers in finding new employment than in recent months.
Where Will That $2 Trillion Come From Anyway?
Wells Fargo Economics & Financial Report / Apr 01, 2020
Net Treasury issuance is set to surge in the coming weeks and months. At present, we look for the federal budget deficit to be $2.4 trillion in FY 2020 and $1.7 trillion in FY 2021.
This Week's State Of The Economy - What Is Ahead? - 01 July 2022
Wells Fargo Economics & Financial Report / Jul 14, 2022
As with the Mets and Yankees when they ran into the Astros over the last couple days, consumers staying power is showing signs of running out as inflation persists and confidence moves sharply lower.
This Week's State Of The Economy - What Is Ahead? - 07 October 2022
Wells Fargo Economics & Financial Report / Oct 10, 2022
higher interest rates and inflation appear to be weighing on manufacturing and construction, yet service sector activity remains fairly resilient.
This Week's State Of The Economy - What Is Ahead? - 02 April 2021
Wells Fargo Economics & Financial Report / Apr 08, 2021
Increased vaccinations and an improving public health position led to an easing of restrictions and pickup in activity across the country in March.
This Week's State Of The Economy - What Is Ahead? - 06 August 2021
Wells Fargo Economics & Financial Report / Aug 16, 2021
Back to the economy, issues with supply constraints remains a broken-record reference, but data this week highlighted the economy\'s resilience in spite of those continuing problems.
August 2020 Economy At A Glance
Wells Fargo Economics & Financial Report / Aug 22, 2020
Downstream involves the refining and processing of oil and natural gas into fuels, chemicals, and plastics. All three sectors are well-represented in Houston.
This Week's State Of The Economy - What Is Ahead? - 09 June 2023
Wells Fargo Economics & Financial Report / Jun 14, 2023
An unexpected spike in jobless claims is a sign that cracks are forming in the labor market. Higher mortgage rates look to be hindering a housing market rebound.
This Week's State Of The Economy - What Is Ahead? - 07 June 2024
Wells Fargo Economics & Financial Report / Jun 11, 2024
The U.S. labor market continues to defy expectations. Employers added 272K net new jobs in May, which was stronger than even the most bullish forecaster among 77 submissions to the Bloomberg survey.
This Week's State Of The Economy - What Is Ahead? - 05 June 2020
Wells Fargo Economics & Financial Report / Jun 09, 2020
Data this week continued to suggest the U.S. economy hit rock bottom in April. Still, it is a long road to recovery and the pickup in economic activity will be gradual.
This Week's State Of The Economy - What Is Ahead? - 24 September 2021
Wells Fargo Economics & Financial Report / Oct 10, 2021
While fears of an Evergrande default in China were rattling financial markets, for those of us in Southeast Texas who have survived the typically very hot months of July, August and September, this week brought the very welcome first early fall-like
