{"id":211487,"date":"2024-09-09T09:45:00","date_gmt":"2024-09-09T13:45:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/campus\/?p=211487"},"modified":"2024-09-10T14:19:05","modified_gmt":"2024-09-10T18:19:05","slug":"economic-update-september-9-2024","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/economic-update-september-9-2024\/","title":{"rendered":"Economic Update: September 9, 2024"},"content":{"rendered":"\n

Growth<\/h2>\n\n\n\n

2Q24 GDP growth came in at 3.0% q\/q saar, well above last quarter’s 1.4%. In the details, consumer spending rose by an upward revised 2.9% due to a bounce back in spending on goods, while revisions to residential and nonresidential fixed investment lowered business spending growth to a still strong 7.5% saar. After two quarters of declines, inventory investment rebounded, contributing 78bps to overall economic growth. While the U.S. economy has slowed from its 4.1% pace in 2H23, growth remained solid at 2.2% in 1H24.<\/p>\n\n\n\n

NEW THIS WEEK<\/p>\n\n\n\n

Jobs<\/h2>\n\n\n\n

The August jobs report showed fewer-than-expected job gains of 142K, bringing the three-month moving average down to 116K. In addition, July’s figure was revised down to 89K jobs added. On a positive note, the unemployment rate ticked lower to 4.2%, providing some relief after the recent increase. Lastly, wages grew 0.4% m\/m (3.8% y\/y), which was slightly larger than July’s monthly increase. Overall, this report doesn’t represent a full rebound from last month’s weak figure, but it does help to calm hard landing fears.<\/p>\n\n\n\n

NEW THIS WEEK<\/p>\n\n\n\n

Profits<\/h2>\n\n\n\n

The 2Q24 earnings season has come to a close! 2Q24 pro-forma earnings per share (EPS) were $60.55, representing growth of 11.1% y\/y and 7.3% q\/q. Across sectors, information technology and communication services delivered another quarter of double digit earnings growth, and health care bounced back after a challenging first quarter. Elsewhere, some of the more cyclical sectors, like industrials and materials, saw earnings fall relative to last year. Moving forward, as wage pressures fade and companies focus more on cost management, margins are expected to be the largest contributor to earnings growth.<\/p>\n\n\n\n

Inflation<\/h2>\n\n\n\n

The July CPI report provided more evidence that inflation is on a sustainable path lower. Headline inflation rose 0.2% m\/m and 2.9% y\/y, its slowest pace since March 2021, while core inflation rose 0.2% m\/m and 3.2% y\/y. Both measures were roughly in-line with expectations. In the details, core goods prices fell 0.3% due to lower apparel and vehicle prices, marking the category\u2019s fifth straight monthly decline. Shelter inflation remained elevated, although the 0.4% m\/m rise in owners\u2019 equivalent rent (OER) was its second slowest increase since late 2021. Excluding shelter, core services rose 0.2% m\/m. Auto insurance remained elevated, rising 1.2% m\/m, although this was partially offset by lower airfares. Similarly, both headline and core PCE inflation came in below expectations, rising 2.5% and 2.6% y\/y, respectively. While some of the services components looked more mixed, the lack of troubling details in this report keeps the Fed on track to deliver several rate cuts this year, starting in September.<\/p>\n\n\n\n

Rates<\/h2>\n\n\n\n

At its July meeting, the FOMC voted to hold rates steady at 5.25%-5.50%, as expected. The FOMC statement contained subtle but important dovish tweaks: more confidence on the path of inflation, some concern about a softer labor market and an equal focus again on inflation and full employment. During the press conference, Chair Powell hinted several times that an upcoming rate cut in September might be \u201con the table.\u201d Given a weaker jobs print following the meeting, markets are now expecting the Fed to cut rates more and at a faster pace this year.<\/p>\n\n\n\n

Risks<\/h2>\n\n\n\n