Inflation sucks bruh: JPow's Jihad

[Commissar SFLUFAN]

US GDP growth revised upward in the third quarter from 4.9% to 5.2%.

 

U.S. GDP grew at a 5.2% rate in the third quarter, even stronger than first indicated

WWW.CNBC.COM

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The acceleration topped the initial 4.9% reading and was better than the 5% Dow Jones forecast.

 

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The U.S. economy grew at an even stronger pace then previously indicated in the third quarter, the product of better-than-expected business investment and stronger government spending, the Commerce Department reported Wednesday.

 

Gross domestic product, a measure of all goods and services produced during the three-month period, accelerated at a 5.2% annualized pace, the department’s second estimate showed. The acceleration topped the initial 4.9% reading and was better than the 5% forecast from economists polled by Dow Jones.

 

Primarily, the upward revision came from increases in nonresidential fixed investment, which includes structures, equipment and intellectual property. The category showed a rise of 1.3%, which still marked a sharp downward shift from previous quarters.

 

Government spending also helped boost the Q3 estimate, rising 5.5% for the July-through-September period.

 

However, consumer spending saw a downward revision, now rising just 3.6%, compared with 4% in the initial estimate.

 

 

Looking at the underlying causes -- especially the downward revision for consumer spending --  for the upward revision, I really don't think this changes the Fed's rate change considerations very much at all.

[Commissar SFLUFAN]

The Fed giveth and the Fed taketh away.

 

Fed's Barkin says rate hikes are still on the table if inflation doesn't continue to ease

WWW.CNBC.COM

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Markets largely expect that the Fed has stopped raising rates and will start cutting in 2024.

 

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Richmond Federal Reserve President Thomas Barkin said Wednesday that policymakers need to retain the option of raising interest rates if inflation doesn’t show enough progress coming down.

 

Markets largely expect the Fed has stopped raising rates and will start cutting in 2024. But Barkin said he’s not ready to commit to a particular policy path with so much uncertainty in the air.

 

“If inflation comes down naturally and smoothly, awesome, you know, there’s no particular need to do anything with interest rates if inflation steps down,” he told CNBC’s Steve Liesman during an interview at the CNBC CFO Council Summit.

 

“But if inflation is going to flare back up, I think you want to have the option of doing more on rates,” Barkin added. “I guess the bigger point is, there’s no precision that anyone can point to at exactly what the level of rates that exactly handles inflation and exactly the way you want to handle it. So you’re constantly trying to adjust on the fly as you learn more about the economy.”

 

 

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Pricing in futures markets indicates the Fed could cut rates as much as four times, or a full percentage point, next year. Fed Governor Christopher Waller said Tuesday that he’d consider cuts if the inflation data shows progress over the next several months.

 

However, Barkin called the possibility of easing policy “a forecasting question” that he’s not ready to answer.

 

“I don’t see it as a there’s a right answer on rates or a wrong answer on rates,” he said, adding that he’s “skeptical” about inflation and thinks it’s going to be “stubborn” ahead.

Atlanta Fed President Raphael Bostic also offered commentary Wednesday, saying in an essay that he sees economic growth slowing substantially and believes inflation will come down further as well.

 

“Altogether, the research, data, survey results, and input from business contacts tell me that tighter monetary policy and tighter financial conditions more broadly are biting harder into economic activity,” Bostic wrote. “At the same time, I don’t think we’ve seen the full effects of restrictive policy, another reason I think we’ll see further cooling of economic activity and inflation.”

 

Bostic said his staff expects the inflation rate to decline to 2.5% by the end of 2024 and then get back to the Fed’s 2% target by the end of 2025.

 

 

[Commissar SFLUFAN]

Fed's favorite gauge shows inflation rose 0.2% in October and 3.5% from a year ago, as expected

WWW.CNBC.COM

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The personal consumption expenditures price index was expected to increase 0.2% in October on a monthly basis and 3.5% from a year ago.

 

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Inflation as measured by personal spending increased in line with expectations in October, possibly giving the Federal Reserve more incentive to hold rates steady and perhaps start cutting in 2024, according to a data release Thursday.

 

The personal consumption expenditures price index, excluding food and energy prices, rose 0.2% for the month and 3.5% on a year-over-year basis, the Commerce Department reported. Both numbers aligned with the Dow Jones consensus.

 

Headline inflation was flat on the month and at a 3% rate for the 12-month period, the release also showed. Energy prices fell 2.6% on the month, helping keep overall inflation in check, even as food prices increased 0.2%.

 

Goods prices saw a 0.3% decrease while services rose 0.2%. On the services side, the biggest gainers were international travel, health care and food services and accommodations. In goods, gasoline led the gainers.

 

Personal income and spending both rose 0.2% on the month, also meeting estimates and indicating that consumers are keeping pace with inflation.

 

While the public more closely watches the Labor Department’s consumer price index as an inflation measure, the Fed prefers the core PCE reading. The former measure primarily looks at what goods and services cost, while the latter focuses on what people actually spend, adjusting for consumer behavior when prices fluctuate.

 

In other economic news Thursday, weekly jobless claims rose to 218,000, an increase of 7,000 from the previous period though slightly below the 220,000 estimate. However, continuing claims, which run a week behind, surged to 1.93 million, an increase of 86,000 and the highest level since Nov. 27, 2021, the Labor Department said.

 

[Commissar SFLUFAN]

Fed Chair Powell calls talk of cutting rates 'premature' and says more hikes could happen

WWW.CNBC.COM

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Federal Reserve Chairman Jerome Powell on Friday pushed back on market expectations for aggressive interest rate cuts ahead.

 

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Federal Reserve Chairman Jerome Powell on Friday pushed back on market expectations for aggressive interest rate cuts ahead, calling it too early to declare victory over inflation.

 

Despite a string of positive indicators recently regarding prices, the central bank leader said the Federal Open Market Committee plans on “keeping policy restrictive” until policymakers are convinced that inflation is heading solidly back to 2%.

 

“It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease,” Powell said in prepared remarks for an audience at Spelman College in Atlanta. “We are prepared to tighten policy further if it becomes appropriate to do so.”

 

However, he also noted that policy is “well into restrictive territory” and noted that balance of risks between doing too much or too little on inflation are close to balanced now.

 

Markets moved higher following Powell’s remarks, with major averages positive on Wall Street and Treasury yields sharply lower.

 

“Markets view today’s comments as inching toward the dovish camp,” said Jeffrey Roach, chief economist at LPL Financial.

 

 

Once he started speaking, the stock market took off and Treasury yields tanked.

[Commissar SFLUFAN]

This rally in equities is probably being helped along by the recent sharp plunge in the price of petroleum which is due expectations of a reduction in demand because of the slowing global economy, a substantial increase in US production and inventories, and very tepid OPEC+ production cuts.

[Spork3245]

Don’t worry, the rally’s over

 

[Commissar SFLUFAN]

A significantly cooling job market is precisely what the Fed is looking for to initiate the rate cuts:

 

Job openings slide to 8.7 million in October, well below estimate, to lowest level since March 2021

WWW.CNBC.COM

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Employment openings totaled 8.73 million for the month, a decline of 617,000, or 6.6%, the Labor Department reported Tuesday.

 

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Job openings tumbled in October to their lowest in 2½ years, a sign that the historically tight labor market could be loosening.

 

Employment openings totaled 8.73 million for the month, a decline of 617,000, or 6.6%, the Labor Department reported Tuesday. The number was well below the 9.4 million estimate from Dow Jones and the lowest since March 2021.

 

The decline in vacancies brought the ratio of openings to available workers down to 1.3 to 1, a level that only a few months ago was around 2 to 1.

 

Federal Reserve policymakers watch the report, known as the Job Openings and Labor Turnover Survey, closely for signs of labor slack. The Fed has boosted interest rates dramatically since March 2022 in an effort to slow the labor market and cool inflation, and is contemplating its next policy move.

 

While job openings fell dramatically, total hires only nudged lower while layoffs and separations were modestly higher. Quits, which are seen as a measure of worker confidence in the ability to change jobs and find another one easily, also were little changed.

 

Declines in job openings were widespread by industry.

 

The biggest sector decline was education and health services (-238,000), followed by financial activities (-217,000), leisure and hospitality (-136,000) and retail (-102,000).

 

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Fed officials have been targeting the red-hot jobs market as a specific area of concern in their battle to take inflation down from what had been a four-decade high last year. Seeing a decline in job openings likely will be welcome news to policymakers as it could mean that less labor demand could help bring the jobs market back in line from what had been a huge mismatch with supply.

 

The Fed holds its two-day policy meeting next week, with markets largely expecting the Federal Open Market Committee to leave interest rates unchanged. Traders in the fed funds futures market are pricing in rate cuts to begin in March on anticipation that inflation data will continue to show progress and as the central bank tries to fend off a potential slowdown or recession ahead.

 

 

[Commissar SFLUFAN]

More evidence of a cooling labor market:

 

Private payrolls increased by 103,000 in November, below expectations, ADP says

WWW.CNBC.COM

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Private sector job creation slowed further in November and wages showed their smallest growth in more than two years, ADP reported.

 

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Private sector job creation slowed further in November and wages showed their smallest growth in more than two years, payrolls processing firm ADP reported Wednesday.

Companies added just 103,000 workers for the month, slightly below the downwardly revised 106,000 in October and missing the 128,000 Dow Jones estimate.

 

Along with the modest job growth came a 5.6% increase in annual pay, which ADP said was the smallest gain since September 2021. Job-changers saw wage increases of 8.3%, making the premium for switching positions the lowest since ADP began tracking the data three years ago.

 

After leading job creation for most of the period since Covid hit in early 2020, leisure and hospitality recorded a loss of 7,000 jobs for the month. Trade, transportation and utilities saw an increase of 55,000 positions, while education and health services added 44,000 and other services contributed 15,000.

 

Services-related industries provided all the job gains for the month, as goods-producers saw a net loss of 14,000 due to declines of 15,000 in manufacturing, despite the settlement in the United Auto Workers strikes, and 4,000 in construction. Recent layoffs in Silicon Valley and on Wall Street also did not show up in the data, as both sectors posted gains on the month.

 

“Restaurants and hotels were the biggest job creators during the post-pandemic recovery,” said ADP’s chief economist, Nela Richardson. “But that boost is behind us, and the return to trend in leisure and hospitality suggests the economy as a whole will see more moderate hiring and wage growth in 2024.”

 

[Commissar SFLUFAN]

Uh-oh - the November non-farm payrolls report came in a bit hotter than expected!

 

U.S. payrolls rose 199,000 in November, unemployment rate falls to 3.7%

WWW.CNBC.COM

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Nonfarm payrolls were expected to increase by 190,000 in November, according to the Dow Jones consensus estimate.

 

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Job creation showed little signs of a letup in November, as payrolls grew even faster than expected and the unemployment rate fell despite signs of a weakening economy.

 

Nonfarm payrolls rose by a seasonally adjusted 199,000 for the month, slightly better than the 190,000 Dow Jones estimate and ahead of the unrevised October gain of 150,000, the Labor Department reported Friday.

 

The unemployment rate declined to 3.7%, compared with the forecast for 3.9%, as the labor force participation rate edged higher to 62.8%. A more encompassing unemployment rate that includes discouraged workers and those holding part-time positions for economic reasons fell to 7%, a decline of 0.2 percentage point.

 

 

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The department’s survey of households, used to calculate the unemployment rate, showed much more robust job growth of 747,000 and an addition of 532,000 workers to the labor force.

 

Average hourly earnings, a key inflation indicator, increased by 0.4% for the month and 4% from a year ago. The monthly increase was slightly ahead of the 0.3% estimate, but the yearly rate was in line.

 

Markets showed mixed reaction to the report, with stock market futures modestly negative while Treasury yields surged.

 

“What we wanted was a strong but moderating labor market, and that’s what we saw in the November report,” said Robert Frick, corporate economist with Navy Federal Credit Union, noting “healthy job growth, lower unemployment, and decent wage increases. All this points to the labor market reaching a natural equilibrium around 150,000 jobs [per month] next year, which is plenty to continue the expansion, and not enough to trigger a Fed rate hike.”

 

 

[CayceG]

I don't think the economy is really that bad. 

 

 

I just think home interest rates are too high. 

[finaljedi]

I guess that jobs report means that economists will talk about more "tough love" for people.

[Commissar SFLUFAN]

6 minutes ago, CayceG said:

I don't think the economy is really that bad. 

 

 

I just think home interest rates are too high. 

 

Beyond interest rates, the elevated levels of inflation did impact people's reality and perceptions of their overall buying power.  Sure, they might've seen an increase in their income, but that was swallowed by the overall increase in the goods and services that they consume. Furthermore, the increase in their net worth was largely due to the increase in the value of their homes, which represents an intangible asset that can't exactly easily converted into liquid cash.

 

This inflationary period simply left people feeling that their financial existence is more "precarious" than they originally assumed.

[Commissar SFLUFAN]

This is a really good article that illustrates the dynamics of inflation that I alluded to in my previous post:

 

Why Inflation Hits Poor Americans Hardest | City Journal

WWW.CITY-JOURNAL.ORG

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Asset allocation determines the net effect of a loss in dollar value for households.

 

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Eighty-two percent of Americans say that price increases are their biggest source of financial stress, according to a recent Financial Times–Michigan Ross poll. Only 14 percent, meantime, say that they are better off financially since President Joe Biden took office. Yet new data from the Federal Reserve’s Survey of Consumer Finances show that median household net worth grew 37 percent between 2019 and 2022, reaching the survey’s historical high. These seemingly contradictory data have commentators struggling to explain why strong wealth growth hasn’t translated into strong poll ratings for the president.

 

A new NBER working paper from Edward Wolff digs into the complex dynamics between inflation and wealth and helps resolve the paradox. While Wolff’s analysis is based on household data from 1983 to 2019, it is useful for understanding the popular reaction to the recent burst of high inflation.

 

Wolff’s results show that the “inflation tax”—defined as the difference between the nominal and real growth in income—falls unevenly across the rich, the middle class, and the working class because of differences in their asset composition. Some households near the median and at the top of the wealth distribution see a net benefit from inflation, while those with low wealth miss out on any opportunities to offset inflation’s costs.

 

Wolff tracks a new measure called net inflation gain, which divides household assets and liabilities between those that fall in value and those that rise in value due to inflation. Household assets that fall in value include wages, salaries, and other income sources set in dollar amounts. When the value of the dollar goes down, the real purchasing power of those income streams drops. That fall in value also hits liquid assets, which are short-term savings for upcoming spending. The drop in purchasing power is the most visible and recognizable effect of inflation.

 

Household assets that rise in value include real estate and business equity. The flip side of the dollar’s drop in value is that the same real assets can be sold for more dollars. That counts for businesses that produce real goods and services, and for the equity owners who get profits from those businesses. Households that own stock indirectly through mutual funds and pension plans benefit from this dynamic, as well.

 

Household debts that fall in value include student loans, mortgages, and consumer debt. When the dollar declines, debts with fixed dollar amounts are repaid in dollars that are worth less and thus cost the household less. Whether a household considers inflation a net positive or a net negative, therefore, depends on its net asset position, itself largely dependent on income.

 

 

[mclumber1]

19 minutes ago, CayceG said:

I don't think the economy is really that bad. 

 

 

I just think home interest rates are too high. 

 

Interest rates need to remain high if we hope to see property prices go down.  Even if the interest rates were cut in half today, a $500k home is still unaffordable.  That same home was only $300k or less pre-pandemic. 

[Commissar SFLUFAN]

And just as I posted that article, this report was released:

 

Inflation expectations plunge in closely watched University of Michigan survey

WWW.CNBC.COM

 

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Consumers fears over inflation tumbled in December amid declining energy prices and as the impact of interest rate hikes take hold.

 

In the latest University of Michigan consumer sentiment survey, the one-year outlook for the inflation rate slid to 3.1%, down sharply from 4.5% in November. The five-year outlook also moved lower, down to 2.8% from 3.2% the previous month.

 

Federal Reserve officials consider consumer expectations a key in the way inflation moves, so the switch in sentiment could further convince policymakers to keep interest rates on hold and possibly start cutting in 2024. The University of Michigan survey is one of the more closely watched gauges.

 

Inflation sentiment in turn is tied closely to the direction of energy costs and prices at the pump in particular. The price of a gallon of unleaded gas has fallen 22 cents to $3.18 over the past month, according to AAA.

 

[Ominous]

10 minutes ago, mclumber1 said:

 

Interest rates need to remain high if we hope to see property prices go down.  Even if the interest rates were cut in half today, a $500k home is still unaffordable.  That same home was only $300k or less pre-pandemic. 

A lack of homes will ensure prices don't decline much, if at all. Existing home owners will either not want to move due to their sub 3 percent interest rate or they will buy a new home and flip their current home to an investment property which doesn't help anyone looking to buy a new home.  Let's burn it all down. 

[Commissar SFLUFAN]

10 minutes ago, mclumber1 said:

 

Interest rates need to remain high if we hope to see property prices go down.  Even if the interest rates were cut in half today, a $500k home is still unaffordable.  That same home was only $300k or less pre-pandemic. 

 

Just now, Ominous said:

A lack of homes will ensure prices don't decline much, if at all. 

 

Yeah - high interest rates aren't going to substantively address the supply side of the equation.

[elbobo]

41 minutes ago, CayceG said:

I don't think the economy is really that bad. 

 

 

I just think home interest rates are too high. 

 

Jobs are plentiful but people are struggling more and more it seems. Wages have not come close to keeping up with costs, many things you need to live or function in society(food, housing, car) have gone up dramatically in the last few years especially once you factor in interest payments that most people will have to make on the big ticket items.

[Commissar SFLUFAN]

1 hour ago, Commissar SFLUFAN said:

Yeah - high interest rates aren't going to substantively address the supply side of the equation.

 

Upon further reflection, high interest rates negatively impact the supply side (as well as the demand side) because they make the cost to finance new construction projects more expensive which in turn impacts the ROI decision to whether or not proceed with the project.

[Commissar SFLUFAN]

5 minutes ago, elbobo said:

 

Jobs are plentiful but people are struggling more and more it seems. Wages have not come close to keeping up with costs, many things you need to live or function in society(food, housing, car) have gone up dramatically in the last few years especially once you factor in interest payments that most people will have to make on the big ticket items.

 

Furthermore, credit card debt keeps hitting new highs and that's not because people are using them to purchase big ticket items, but because they're using them for basic needs.

[osxmatt]

2 hours ago, CayceG said:

I don't think the economy is really that bad. 

 

 

I just think home interest rates are too high. 

 

I largely agree with this. I don’t think the metrics we use to measure the ‘economy’ are a particularly good indicator of the actual economy, at least in the way the average person thinks about it.

 

I think in general, the average person really views the ‘economy’ in the terms of disposable income, or money left over after their bills are paid. But that’s not really how we measure the ‘economy.’

 

I think that’s why there is such a disconnect between Democratic messaging and the average voter. Because to the ruling/governing/intellectual class, a lot of the metrics we use to measure the economy: unemployment rate, jobs added, wages, etc are doing very well.

[CayceG]

31 minutes ago, osxmatt said:

 

I largely agree with this. I don’t think the metrics we use to measure the ‘economy’ are a particularly good indicator of the actual economy, at least in the way the average person thinks about it.

 

I think in general, the average person really views the ‘economy’ in the terms of disposable income, or money left over after their bills are paid. But that’s not really how we measure the ‘economy.’

 

I think that’s why there is such a disconnect between Democratic messaging and the average voter. Because to the ruling/governing/intellectual class, a lot of the metrics we use to measure the economy: unemployment rate, jobs added, wages, etc are doing very well.

 

100% this. 

 

How the average person "feels" is not an indicator of "the economy" at large. But the indicators of "the economy" are not what has the main effect on the average person. 

 

The disconnect isn't between Dems and the average voter. The Republicans have the same disconnect. And no one in power is actually capable of bridging that disconnect--AOC, Bernie, and Fetterman included. 

[CitizenVectron]

It's like when people use GDP to measure how great a place is. I don't care what you tell me, I'd much rather live in London, Berlin, Vancouver, or Stockholm than Los Angeles, damn the wealth/production in that place.

[Commissar SFLUFAN]

1 hour ago, osxmatt said:

 

I largely agree with this. I don’t think the metrics we use to measure the ‘economy’ are a particularly good indicator of the actual economy, at least in the way the average person thinks about it.

 

I think in general, the average person really views the ‘economy’ in the terms of disposable income, or money left over after their bills are paid. But that’s not really how we measure the ‘economy.’

 

I think that’s why there is such a disconnect between Democratic messaging and the average voter. Because to the ruling/governing/intellectual class, a lot of the metrics we use to measure the economy: unemployment rate, jobs added, wages, etc are doing very well.

 

This is why "Bidenomics" has landed with a such resounding thud and that messaging has largely been discarded.

 

Our traditional metrics simply don't measure the degree to which the average person views their and their family's financial situation as precarious.

[Commissar SFLUFAN]

This week's economic report calendar contains some heavy-hitters that could significantly determine the timing of the Fed's future rate actions:

 

U.S. Economic Calendar - MarketWatch

WWW.MARKETWATCH.COM

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U.S. economic calendar consensus forecasts from MarketWatch.

 

[Commissar SFLUFAN]

A couple more data points indicating an overall easing of inflation:

 

Inflation slowed to a 3.1% annual rate in November

WWW.CNBC.COM

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The consumer price index was expected to be flat in November and up 3.1% from a year ago, according to Dow Jones consensus estimates.

 

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Prices across a broad range of goods and services edged higher in November but were mostly in line with expectations, further easing pressure on the Federal Reserve.

 

The consumer price index, a closely watched inflation gauge, increased 0.1% in November, and was up 3.1% from a year ago, the Labor Department reported Tuesday. Economists surveyed by Dow Jones had been looking for no gain and a yearly rate of 3.1%.

 

While the monthly rate indicated a pickup from the flat CPI reading in October, the annual rate showed another decline after hitting 3.2% a month earlier.

Excluding volatile food and energy prices, the core CPI increased 0.3% on the month and 4% from a year ago. Both numbers were in line with estimates and little changed from October.

The November numbers are still well above the Fed’s 2% target, though showing continuing progress. Policymakers focus more on core inflation as a signal for longer-term trends.

 

 

 

Wholesale prices held flat in November, providing another encouraging inflation signal

WWW.CNBC.COM

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The producer price index, which measures a broad range of prices on final demand items, was unchanged for the month.

 

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Wholesale prices were flat in November, providing a leading indicator that inflation is easing, the Labor Department reported Wednesday.

 

The producer price index, which measures a broad range of prices on final demand items, was unchanged for the month, following a 0.4% decrease in October but less than the Dow Jones estimate for a 0.1% gain. On a year-over-year basis, headline PPI accelerated just 0.9%, after peaking above 11.5% in March 2022.

 

Excluding food and energy, the index also was unchanged against an estimate for a 0.2% increase. Excluding food, energy and trade services, PPI increased 0.1%, posting a sixth straight increase and good for a 12-month gain of 2.5%.

 

 

[outsida]

Just paid $2.55 for gas

[osxmatt]

Fed indicated 3 rate cuts in 2024

 

Fed Holds Rates Steady and Sees Cuts Next Year

WWW.WSJ.COM

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Officials don’t rule out further hikes while penciling in three rate cuts in 2024

 

[Commissar SFLUFAN]

Of course the Fed had to caveat the projected rate cuts with a perfunctory "we reserve the right to raise them should conditions warrant" disclaimer 

[Spork3245]

SPY just hit a new ATH.

[Commissar SFLUFAN]

Dear God @ the stock market 

[osxmatt]

4 minutes ago, Commissar SFLUFAN said:

Dear God @ the stock market 

 

Telling my wife we don't have to order off the value menu anymore!

[TUFKAK]

14 minutes ago, Commissar SFLUFAN said:

Dear God @ the stock market 

Should’ve waited before I pulled some money out of vtsax dammit 

[Commissar SFLUFAN]

U.S. 10 Year Treasury yields trending downwards towards 4.00%

[Commissar SFLUFAN]

CNBC's trader picture of the day: