In the United States, inflation showed moderate growth in September and approached the Federal Reserve’s target of 2%.
Information about the dynamic of the mentioned indicator last month was published by the US Commerce Department on Thursday, October 31.
The personal consumption expenditures price index for September showed a seasonally adjusted 0.2% increase. The 12-month inflation rate was fixed at 2.1%. It is worth noting that the appropriate indicator corresponds to the preliminary estimates of Dow Jones.
The central bank of the United States uses the personal consumption expenditures price index as a primary gauge of inflation. At the same time, Fed officials, when making decisions in the context of making changes to monetary policy, pay attention to several other indicators.
It’s worth noting that the target of the central bank of the United States for inflation of 2% is not a fact of objective economic reality in the country since February 2021. So far, the corresponding indicator remains a theoretical goal, the practical movement towards achieving which is already underway and shows positive prospects. In September, the headline inflation rate decreased by 0.2% compared to the reading, which was recorded in August. The сentral bank of the United States is gradually approaching its target, despite external and internal risks, and the fact that the global economy as a whole is currently facing the problem of uncertainty, which is a negative circumstance for business activity and worsens the prospects for the manufacturing sector.
It is worth noting that in September in the United States, the inflation rate, which does not take into account the dynamic of food and energy prices, was fixed at 2.7%. Against the corresponding background, the so-called core measure showed an increase of 0.3% on a monthly basis. The annual rate exceeded the preliminary forecast by 0.1%, but at the same time remained the same as in August.
Prices for services in the United States increased by 0.3% in September. At the same time, goods prices are on a downward trajectory. The corresponding indicator decreased by 0.1% in September. It is worth noting that this is the fourth deflationary result in the mentioned category in the last five months.
Housing prices in the United States showed a slowdown in growth last month. The corresponding indicator increased by 0.3%. At the same time, in the US, energy goods and services fell by 2% in September.
Currently, the markets are dominated by the expectation that next week at a meeting of officials of the central bank of the United States a decision will be made on cutting the benchmark short-term borrowing rate. It is worth mentioning that last month the US financial regulator decided to start easing monetary policy. In September, the Fed lowered the cost of borrowing by a half percentage point. It is worth noting that these actions by the central bank of the United States turned out to be more decisive and ambitious than analysts’ preliminary expectations regarding the pace of the initial stage of monetary policy easing.
Currently, the prevailing view among Fed officials is that inflation is on a steady trajectory toward the target. At the same time, they demonstrate concern about the state of affairs in the labor market. At the same time, recent data indicate that hiring continues in the United States and the number of layoffs is at a low level.
A separate report released on Thursday indicates that currently, the US companies are mostly hanging onto their employees. According to the United States Labor Department, for the week ending October 26, initial filings for unemployment benefits totaled 216,000. This figure is 12,000 lower than the previous period’s upwardly revised level. Also, the final result did not coincide with the preliminary forecast of the analysts interviewed by the media, who expected that initial filings for unemployment benefits would amount to 230,000.
The third consecutive weekly decline in the mentioned indicator is most likely a reflection of the faded economic effects of hurricanes Milton and Helene. In early October, these natural circumstances contributed to an increase in the number of claims. Moreover, another factor affecting the dynamic of the corresponding indicator was the strike at Boeing. Against this background, the plane manufacturer has made such a decision as rolling furloughs. The corresponding action became a factor of damage to Boeing suppliers.
Last week, unadjusted claims fell by 3,349, to 200,132. In North Carolina, this figure decreased by 2,969. In Florida, the number of filings declined by 2,692. Applications also found themselves on a downward trajectory in California, which helped to more than offset a 2,061 jump in claims in New York and a 1,854 increase in Michigan.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, decreased by 26,000 to a seasonally adjusted 1.862 million for the week ending October 19.
The published data indicate that the effects of hurricanes and the strike, which form what can be described as a situation of volatility, probably did not cause a significant change in the state of affairs in the US labor market.
The report, which was released by global outplacement company Challenger, Gray & Christmas on Thursday, contains information that in October, planned layoffs by employers fell by 23.7% to 55,597.
At the same time, storms and labor strife are likely to have become deterrents in the context of the impact of the increase in the number of jobs in the United States last month. Last week, the US Labor Department reported that 41,400 workers, including employees of Boeing and three hotel chains, were on strike during the period when employers were surveyed for the employment report.
Preliminary estimates by economists suggest that the drag on payrolls from Helene and Milton could be as much as 70,000.
A survey conducted by the media indicates that nonfarm payrolls probably increased by 113,000 jobs in October. It is worth noting that last month the corresponding figure increased by 254,000.
According to media reports, the October unemployment rate in the United States will not show any changes and will remain at 4.1%. On Friday, November 1, the US Labor Department plans to release an employment report. These will be the last important economic data before the election of the President of the United States, which is scheduled for November 5. It is worth noting that the situation in the economic space is an important political issue, which becomes more relevant during the pre-election period.
Currently, in the United States, the stability of the labor market is combined with a decrease in inflation, an increase in household net worth, and rising housing prices. These factors support the spending and the condition of the US economic system as a whole.
Despite various concerns about the inflationary process in the United States, data released by the US Commerce Department on Thursday showed that income and spending held up during the month.
Personal income in September in the US showed an increase of 0.3%. This result corresponds to the preliminary expectations. Consumer spending in the United States increased by 0.5% in September. This result exceeded the outlook by 0.1%.
The personal saving rate in the United States in September was fixed at 4.6%. It is worth noting that this indicator is the lowest in a year.
Also, on Thursday, the US Bureau of Labor Statistics released information according to which the employment cost index in the third quarter of 2024 showed an increase of 0.8%. This indicator is 0.1% lower than the forecast. On a 12-month basis, the index, which measures wages, salaries, and benefits, rose by 3,9%.
Ryan Sweet, chief economist at Oxford Economics, said there was no concern that inflation moving towards the Fed’s target is stalling.
Gregory Daco, EY Parthenon chief economist, during a conversation with media representatives, stated that some of the factors that are keeping the core consumption expenditures price index in such a stubborn state are somewhat sticky price pressures in real estate and housing, and insurance. The expert noted that, in general, inflation is within striking distance of the target of the central bank of the United States. According to Gregory Daco, recent data suggest that the Fed should recalibrate its monetary policy strategy and abandon the restrictive approach that this financial regulator adopted when inflation was closer to 6%.
The central bank of the United States has already started cutting interest rates. So far, there is no definitive understanding as to what further actions will be taken by the US financial regulator in the context of monetary policy. The probability that the lowering of the cost of borrowing will continue is high. At the same time, some experts talk about the risks of increased inflation. If the corresponding forecast is implemented in the space of economic reality, the central bank of the United States will be forced to decide to raise interest rates.
The forecasts of the Fed in general and its chairman Jerome Powell in particular indicate that, with a high degree of probability, by the end of the current year, the US financial regulator will lower the cost of borrowing two times. It is expected that in each of these cases, the corresponding indicator will be cut by 25 basis points. According to the CME FedWatch Tool, the market is currently dominated by the view that next week officials of the central bank of the United States will decide on lowering the cost of borrowing by a quarter-point.
Gus Faucher, PNC chief economist, wrote in a note to clients on Thursday that the saving rate fell to its lowest level in a year, at 4.6%, however, there was a large upward revision to this indicator, which reduces some concerns about excessive burden on US consumers. The expert also stated that spending growth was particularly strong in September, and it cannot continue to indefinitely outpace the increase in income. At the same time, Gus Faucher noted that while maintaining a stable situation in the labor market, good jobs, and wage gains, consumer spending can show a steady increase.
As we have reported earlier, US Economy Demonstrates Solid Growth.
