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.
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
Wells Fargo Economics & Financial Report / Apr 27, 2022
I’ll wish you a Happy Earth Day anyway. Don’t expect a card this year. While the Earth continues to thankfully revolve at a steady rate, rising mortgage rates appear to be slowing residential activity
Wells Fargo Economics & Financial Report / Oct 13, 2023
The Consumer Price Index (CPI) rose 0.4% in September, a monthly change that was a bit softer than the 0.6% increase registered in August. The core CPI rose 0.3% during the month, a pace unchanged from the month prior.
Wells Fargo Economics & Financial Report / May 18, 2021
The gain in output leaves the level of real GDP just a stone\'s throw below its pre-COVID Q4-2019 level (see chart).
Wells Fargo Economics & Financial Report / Jul 04, 2020
It was a mildly busy week for foreign economic data and events, while global COVID-19 cases continued to rise.
Wells Fargo Economics & Financial Report / Apr 18, 2020
Economic data from the early stages of the Great Shutdown have finally arrived, and they are as bad as feared. ‘Worst on record’ is about to become an all too common refrain in our commentary.
Wells Fargo Economics & Financial Report / Aug 17, 2019
Markets gyrated this week as the spread between the ten- and two-year Treasury\'s turned negative for the first time since 2007. Financial markets seem to expect that the sharp slowdown in growth overseas will soon spread to the United States.
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.
Wells Fargo Economics & Financial Report / Jun 26, 2021
Okay, so I’ve gotten about half a dozen calls since Wednesday asking if I saw the May CPI numbers that came out this week.
Wells Fargo Economics & Financial Report / Mar 07, 2023
Looking at Q4 GDP, Australia\'s economy grew by less than expected, GDP was flat for the quarter in both Canada and Switzerland, and Sweden\'s economy contracted in the final quarter of last year.