The Personal Consumption Expenditures Index Eased From 3.4% in September to 3.0% in October… The core Personal Consumption Expenditures Index (PCE), the Fed’s preferred inflation gauge, dropped from 3.7% to 3.5%.
What it means— Investors took the slowdown in PCE as further evidence that the Fed is done raising rates. We’re not so sure. Falling energy prices gave consumers a break over the past two months, but that’s over. Also, the PCE incorporates changing consumer behavior (substituting cheaper goods) quickly, so it makes sense that PCE would drop faster than the Consumer Price Index. But we’re not happy about it. The central bankers want inflation all but dead before they take their collective foot off the economic brake. We’ll see what Chair Powell has to say after the last monetary policy meeting of the year, and we’ll see their latest economic forecasts.
October New Home Sales Dropped 5.6% to an Annualized Rate of 679,000… The September rate was revised from 759,000 to 719,000.
What it means— The new-home median sales price fell slightly from $422,300 to $409,300, the lowest level since August 2021. With new homes, that’s more of an indication of the price point where builders see the most demand than where they could sell homes. Supply rose because the rate of sales eased. Given that mortgage rates briefly touched 8% last month, it’s interesting that sales didn’t fall more.
OPEC+ Agreed To Cut Oil Production by Another One Million Barrels per Day… The cut is in addition to previous cuts and could be increased by as much as two million barrels per day in the first quarter of 2024.
What it means— If the U.S. does not fall into a recession and China dumps enough stimulus into its economy to avoid a recession, then constraining oil supplies will hurt. Rising energy prices will keep inflation higher than the central bankers want, which could influence their decision on raising rates one more time before calling it quits.
General Motors (NYSE: GM) Announces Lower Capital Investments and a Big Stock Buyback… After hearing the news, investors pushed GM’s stock up 9%.
What it means— Wondering what would make GM slow down its capital investment, which is almost entirely centered on electric vehicles (EVs)? Could it be that consumers aren’t buying them at a rapid pace or perhaps that consumers prefer plug-in hybrids like Toyota builds, not the full-battery EVs that GM is betting on? As to the announced stock buyback, shareholders like that a lot, but let’s put it into context. GM went public (again) 13 years ago at $33. Watching the stock climb from the upper $20s to around $32 isn’t very exciting and doesn’t come close to justifying CEO Mary Barra’s $29 million pay package.
The Pew Charitable Trusts Will No Longer Identify Groups Like Millennials and Gen Z Because People in Those Categories Don’t Like It… In an article worthy of the website Not the Bee, the non-satirical counterpoint to the deliberately fake news site The Babylon Bee, the Pew Trusts announced that they would no longer use generational descriptors. They noted that Millennials were infamous for spending on avocado toast and Gen Z for job hopping. The article doesn’t point to any data refuting that Millennials eat the most avocado toast, and Pew notes that people in Gen Z take issue with the notion that they job hop or are lazy. Instead, people in Gen Z note that they have different thinking on flexibility and work-life balance. In other words, it’s not that they are lazy or quitters, they just don’t want to work.
Data supplied by HS Dent Research
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