The economy grew at a 2.1% annualized rate in 2Q23, in-line with last quarter\u2019s 2.2% pace. Consumption grew a modest 0.8% saar, while private domestic final sales increased at a 1.7% rate. Business fixed investment spending also grew 5.2%, its best pace since 1Q22. Further, comprehensive GDP revisions painted a picture of private sector resilience and improved household savings with softer consumption growth than previously reported. The economy is clearly showing resiliency in the face of monetary tightening, but strains on the consumer and business spending may temper growth in the coming quarters.<\/p>\n\n\n\n
The August Jobs report provided further evidence that the labor market is softening. Nonfarm payrolls rose by a stronger than expected 187K. However, revisions cut 110K jobs for the last two months, suggesting a slowdown in hiring. A large increase in the labor force pushed the unemployment rate higher to 3.8%, while wage growth came in below expectations, gaining 0.2% m\/m and 4.3% y\/y. Overall, this report still shows decent momentum in the labor market and a recession this year seems unlikely. That said, a more balanced labor market and easing wage pressures should allow core inflation to move lower, reducing the need for the Fed to hike further.<\/p>\n\n\n\n
Earnings remained resilient during the 2Q earnings season. Our final estimate for 2Q 2023 operating earnings per share is $54.90, representing y\/y growth of 17.1% and q\/q growth of 4.5%. While a strong 71% of companies beat earnings estimates, only 53% beat revenue expectations amidst slowing inflation. Importantly, profit margins improved, with our current estimate tracking 11.9%. Financials was the largest contributor to EPS growth, while the energy sector was the largest detractor.<\/p>\n\n\n\n
The August CPI report showed continued progress on core inflation while energy contributed to a bounce in headline inflation. Headline CPI rose 0.6% m\/m seasonally adjusted and 3.7% y\/y non-seasonally adjusted, an acceleration compared to last month. This increase was largely anticipated and primarily driven by a 5.6% surge in energy prices, as consumer prices rose a more modest 0.3% excluding energy. Core CPI rose 0.3% m\/m and eased to 4.3% on a y\/y basis. In the details, shelter inflation continued to moderate while transportation services saw strong gains. However, moderating new and used vehicle prices in the months ahead should help ease core inflationary pressures. Similarly, headline PCE inflation accelerated to 3.5% y\/y while core PCE eased to 3.9%. Moving forward, we expect that the impact of oil price spikes will be limited, and this report bolsters the case for the Fed to pause rate hikes.<\/p>\n\n\n\n
In a widely anticipated move, the FOMC voted to leave the federal funds rate unchanged at a range of 5.25% to 5.50% at its September meeting. The updated \u201cdot plot\u201d remained hawkish, with the median FOMC member now expecting only two cuts in 2024. This likely stems from the Fed\u2019s expectation for continued economic resilience. In the Summary of Economic Projections, real GDP growth expectations rose meaningfully for 2023 and 2024. Elsewhere, the median forecast for the unemployment rate fell to 3.8% while the core PCE forecast ticked lower. Overall, the Fed appears to be forecasting a \u201csoft-landing\u201d scenario. However, with plenty of headwinds facing the current economic expansion, the risk of overtightening could challenge this outlook.<\/p>\n\n\n\n
This weekly update provides a snapshot of changes in the economy and markets and their implications for investors.<\/a><\/strong><\/p>\n\n\n\n \u2014<\/p>\n\n\n\n Originally Posted October 2, 2023 \u2013 Economic Update<\/a><\/p>\n\n\n\n This website is a general communication being provided for informational purposes only. It is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purposes. By receiving this communication you agree with the intended purpose described above. Any examples used in this material are generic, hypothetical and for illustration purposes only. None of J.P. Morgan Asset Management, its affiliates or representatives is suggesting that the recipient or any other person take a specific course of action or any action at all. Communications such as this are not impartial and are provided in connection with the advertising and marketing of products and services. Prior to making any investment or financial decisions, an investor should seek individualized advice from personal financial, legal, tax and other professionals that take into account all of the particular facts and circumstances of an investor\u2019s own situation.<\/p>\n\n\n\n Opinions and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. The views and strategies described may not be suitable for all investors.<\/p>\n\n\n\n INFORMATION REGARDING MUTUAL FUNDS\/ETF: Investors should carefully consider the investment objectives and risks as well as charges and expenses of a mutual fund or ETF before investing. The summary and full prospectuses contain this and other information about the mutual fund or ETF and should be read carefully before investing. To obtain a prospectus for Mutual Funds: Contact JPMorgan Distribution Services, Inc. at 1-800-480-4111 or download<\/a> it from this site. Exchange Traded Funds: Call 1-844-4JPM-ETF or download<\/a> it from this site.<\/p>\n\n\n\n J.P. Morgan Funds and J.P. Morgan ETFs are distributed by JPMorgan Distribution Services, Inc., which is an affiliate of JPMorgan Chase & Co. Affiliates of JPMorgan Chase & Co. receive fees for providing various services to the funds. JPMorgan Distribution Services, Inc. is a member of FINRA<\/a> FINRA\u2019s BrokerCheck<\/a><\/p>\n\n\n\n INFORMATION REGARDING COMMINGLED FUNDS: For additional information regarding the Commingled Pension Trust Funds of JPMorgan Chase Bank, N.A., please contact your J.P. Morgan Asset Management representative.<\/p>\n\n\n\n The Commingled Pension Trust Funds of JPMorgan Chase Bank N.A. are collective trust funds established and maintained by JPMorgan Chase Bank, N.A. under a declaration of trust. The funds are not required to file a prospectus or registration statement with the SEC, and accordingly, neither is available. The funds are available only to certain qualified retirement plans and governmental plans and is not offered to the general public. Units of the funds are not bank deposits and are not insured or guaranteed by any bank, government entity, the FDIC or any other type of deposit insurance. You should carefully consider the investment objectives, risk, charges, and expenses of the fund before investing.<\/p>\n\n\n\n INFORMATION FOR ALL SITE USERS: J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide.<\/p>\n\n\n\n NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE<\/p>\n\n\n\n