In this morning’s data, the PCE Deflator increased 0.2% in October, as expected, and was up 2.3% on an annual basis. The Core PCE Deflator, which excludes food and energy prices and is closely monitored by the Federal Reserve for policy decisions, increased 0.3% in October, also as expected. Core rates grew 2.8% on an annual basis, one tenth above the previous month’s annual figure. Overall, core rates remain sticky as the annual measure increased from the previous month and stays above the Fed’s 2% target.
Meanwhile, Personal Income grew 0.6% in October, double what was expected. Personal Spending grew 0.4%, as expected, and is two tenths lower than the previous month’s revised increase. The personal savings rate as a percentage of disposable income was 4.4%, which was slightly higher than the previous month. The consumer is still spending in the economy, but people remain selective, and they have less to spend on discretionary items given the cost of essentials such as food, as detailed in recent company reports on earnings.
Earlier this morning, Initial Jobless Claims were 213,000 for the week ending November 23rd slightly less than expected and Continuing Claims were 1,907,000 for the week ending November 16th, slightly above the previous week. Initial claims remain in the low 200k range, which suggests a stable labor market where people are continuing to work. If individuals are working, they tend to spend money, which bodes well for the economy.
How the Federal Reserve navigates their interest rate policy considering sticky inflation, selective consumers, and a stable labor market will be key for the markets in the coming weeks as the new administration in Washington takes shape.
In all, the yield on the 10-year US Treasury ticks slightly higher following the PCE data release and equities are mixed in early trading. Happy Thanksgiving to all!
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