Personal Consumption Expenditures Index Dropped 0.1% in November, First Decline in More Than Three Years… Annual Personal Consumption Expenditure (PCE) growth slowed to 2.6%, the lowest rate in over two years.
What it means— This is good for people who watch the PCE, like the Fed. Core PCE eased from 3.4% in October to 3.2%, which shows inflation losing steam. To top it off, personal income jumped 0.4% last month. Rising incomes and disinflation sounds great, but don’t forget that PCE measures the change in prices of a current basket of goods, not the ones you bought a year or two ago. Many of those things now are out of reach.
If you’re thrilled that your falling standard of living over the last three and a half years shows less inflation, then this report is for you! On Wall Street, investors hope the falling PCE will give the Fed room to cut rates in the first quarter. Don’t bet on it. Powell wants to snuff out the light of inflation, and he has told us repeatedly rates will stay high for longer. But the Fed has lost credibility with Wall Street which expects much lower rates next year.
Third-Quarter GDP Growth Revised Lower, From 5.2% to 4.9%… The revision showed lower growth at the end of the third quarter, implying slower growth in the fourth quarter.
What it means— Investors cheered the revision because it implies that the economy was slowing down in the later months, which would give the Fed more reason to cut rates quickly 2024. Chair Powell and other voting members of the Federal Open Market Committee have expressed different views on what they will do next, from leaving overnight rates higher for longer to supporting the economy with a series of quick rate cuts to make sure we don’t fall into a recession. Essentially, the central bankers told us they are waiting for more data, and investors put most of their chips on one side, low growth or even flat. If fourth-quarter GDP growth surprises to the upside, then investors will have to reassess the Fed’s moves in 2024. It could be a very bumpy ride next year.
Housing Starts Jumped 14.8% in November, the Highest Rate Since May… Housing starts remain substantially lower than the peak of 1.8 million in April 2022.
What it means— Builders were ramping up activity in November as mortgage rates eased so they should be doing at least as well in December because mortgage rates fell below 7%. Inventory is still the name of the game. With rates just over 6.50%, buyers might be tempted to jump in before buyers snap up what inventory exists or rates move higher.
Existing Home Sales Rose Last Month for the First Time in Six Months… Existing home sales grew by 0.8% but were 7.3% lower than last November.
What it means— The existing home median sales price last month was $387,600, up 4% from last year. While this is down from the peak of $413,800, it’s a bit higher than the recent low, implying that sellers have the upper hand. Or at least, they would if any existed. Existing home inventory is stalled around 1.13 million, which is about three months of supply at the current rate. Falling rates are motivating buyers, but they would have to drop closer to or below 5% to catch the attention of the many home buyers who have mortgages at 4% or less. It should be a good spring season for sellers.
New Home Sales Fell 12.2% in November, as Higher Rates Took a Toll… Mortgage rates at 8% took some air out of new home sales last month.
What it means— The number of sales fell, but the median new-home sale price rose from $414,900 to $434,700. The supply of new homes shot higher, but that’s more about fewer sales than more units hitting the market. I’ll be interested to see if new home sales rebound in December, as mortgage rates dropped like a rock.
Robbers Run Out of the Building To Find Their Getaway Car Has Been Stolen… Three armed men held up the Hi Lo Check Cashing business in Commerce City, Colorado. When they exited the building, they found someone had stolen their getaway car. The police were already en route and quickly took two of the suspected robbers into custody. The police suspect that the robbers had stolen the vehicle themselves, compounding the crimes.
Data supplied by HS Dent Research
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