Inflation continues to cool and that may mean interest rate cuts in 2024. Here are the five things we learned from U.S. economic data released during the week ending December 15.
Consumer prices had a slight gain in November. The Consumer Price Index (CPI) increased a seasonally adjusted 0.1 percent. CPI had held steady in October and rose 0.6 percent and 0.4 percent in August and September, respectively, leaving the Bureau of Labor Statistics measure up 3.1 percent over the past year. Gasoline and fuel oil prices plummeted 6.0 percent and 2.7 percent, respectively. Removing that, along with a 0.2 percent increase in food CPI, puts core CPI up 0.3 percent for the month and 4.0 percent over the past year. Rising were prices for used cars/trucks, shelter, transportation services, and medical care commodities & services. Apparel and new vehicle prices fell during the month.
Wholesale prices were flat in November. The Producer Price Index (PPI) for final demand held steady after falling 0.4 percent in October, according to the Bureau of Labor Statistics. The core wholesale price measure—which removes energy, food, and trade services—was up 0.1 percent. Goods PPI was flat as the 1.2 percent drop in energy prices counterbalanced gains for food (+0.6 percent) and core goods (+0.2 percent). Services failed to increase for a second straight month. Over the past year, PPI was up a modest 0.9 percent, while the core measure has increased 2.5 percent.
The Fed ended the year without another hike and forecast 2024 rate cuts. The policy statement released following this past week’s Federal Open Market Committee (FOMC) meeting featured a few minor changes from other recent statements. It said that the U.S. economy’s growth rate “has slowed from its strong pace in the third quarter,” and inflation “has eased” but “remains elevated.” As a result, the committee voted unanimously to keep the fed funds target rate at 5.25-5.50 percent and further shrink its Treasury and mortgage-backed securities portfolio. Released at the same time were economic forecasts from Federal Reserve Board members and Federal Reserve Bank presidents. Their median forecast has the U.S. economy expanding 1.4 percent in 2024, with the unemployment rate edging up to a still-low 4.1 percent. They also see inflation moderating to just above its desired two-percent target, with overall inflation and core inflation each at 2.4 percent. Their median forecast suggests three quarter-point cuts in the fed funds rate next year (4.50-4.75 percent) and four reductions in 2025 (3.50-3.75 percent).
Retail grew in November. Retail and food services sales increased 0.3 percent to a seasonally adjusted $705.7 billion. The Census Bureau estimates sales from September to November were 1.5 percent above the preceding three months and 3.4 percent ahead of the comparable 2022 months. November’s activity was up 4.1 percent from a year earlier. Sales at motor vehicle/parts dealers grew 0.5 percent while falling prices led to a 2.9 percent drop at gas stations. Net of both, core retail sales gained 0.6 percent in November and 5.2 percent from a year earlier. Sales increased at retailers focused on sporting goods/hobbies (+1.3 percent), furniture (+0.9 percent), health/personal care (+0.9 percent), apparel (+0.6 percent), and groceries (+0.1 percent). Sales also rose at restaurants/bars (+1.6 percent) and nonstore retailers (+1.0 percent).
Manufacturing output grew slightly in November. The Federal Reserve reports manufacturing production increased a seasonally adjusted 0.3 percent, an improvement over the 0.8 percent decline in October. Durable goods output jumped 1.2 percent, supported by a 7.1 percent post-strike surge for motor vehicles. Nondurables production slumped 0.5 percent. Overall industrial production inched up 0.2 percent, with a 0.3 percent mining gain and a 0.4 drop for utilities. Manufacturing output was off 0.8 percent from a year earlier, while overall industrial production was 0.4 percent below year-ago levels.
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending December 9, 2023, First-Time Claims, seasonally adjusted): 202,000, -19,000 vs. the previous week, +4,000 vs. the same week a year earlier). 4-week moving average: 213,250 (-0.1% vs. the same week a year earlier).
- Import Prices (November 2023, All Imports, not seasonally adjusted): -0.4% vs. October 2023; -1.4% vs. November 2022. Nonfuel Imports: +0.2% vs. October 2023; -0.4% vs. November 2022.
- Export Prices (November 2023, All Exports, not seasonally adjusted): -0.9% vs. October 2023; -5.2% vs. November 2023. Nonagricultural Exports: -1.0% vs. October 2023; -4.5% vs. November 2022.
- Business Inventories (October 2023, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.550 trillion (-0.1% vs. September 2023; +0.6% vs. October 2022).
- Small Business Optimism Index (November 2023, Index (1986=100), seasonally adjusted): 90.6 (October 2023: 90.7; November 2022: 91.9).
- Treasury Budget (November 2023 (1st 2 Months of FY2024), U.S. Government Budget Deficit): -$380.6 billion (vs. 1st 2 Months of FY2023: -$336.4 billion).
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What We Learned About the U.S. Economy Last Week 